Corporation Law Digest Compilation

8/11/2019 Corporation Law Digest Compilation

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National Coal Co. v. CIR Case Brief

Facts: The National Coal Co.(NCC) was created by a speciallaw and was enacted by virtue of Act 27 ! in order to developa coal industry. "t was en#a#ed in coal $inin# on reservedlands belon#in# to the #overn$ent. The National Coal Co.(NCC) %led a case a#ainst the C"& for the recovery of su$ of $oney it paid on protest as speci%c ta' on 2 *+ tons of coals clai$in# e'e$ption to ta' pursuant to ,ec. - and -! of Act 27-+.

"ssue: hether or not NCC is a private corporation/

0eld: 1lainti is a private corporation. The $ere fact that the#overn$ent is a $a3ority stoc4holder of the corporation doesnot $a4e the corporation. Act 27 ! as a$ended by Act 2*22$a4es it sub3ect to all the provision of the corporation law. Asa private corporation it has no #reater ri#hts powers orprivile#es than any other corporation which $ay be or#ani5edfor the sa$e purpose under the corporation law and certainlyit was not the intention of the le#islature to #ive preference orri#ht or privile#e over other le#iti$ate private corporation inthe $inin# of coal. NCC is re6uired to pay ta'es pursuant to,ection - + of the Ad$inistrative Code. 8oreover Act 27-+is applicable only to lessee or owner of coal bearin# landswhich NCC is not.

Abejo vs. De la Cruz9.&. No. ;

FACT,: Case involves a dispute between the principalstoc4holders of the corporation 1oc4et >ell 1hilippines "nc.(1oc4et >ell) na$ely spouses Abe3os? and the purchaser

Telectronic ,yste$s "nc. (Telectronics) of their $inorityshareholdin#s and of shares re#istered in the na$e of spouses>ra#as?. ith the said purchases Telectronics would beco$ethe $a3ority stoc4holder holdin# ! @ of the outstandin#stoc4 and votin# power of the corporation 1oc4et >ell.

Telectronics re6uested the corporate secretary of thecorporation Norberto >ra#a to re#ister and transfer to itsna$e and those of its no$inees the total -+ 1oc4et >ell

shares in the corporation s transfer boo4 cancel thesurrendered certi%cates of stoc4 and issue the correspondin#new certi%cates of stoc4 in its na$e and those of itsno$inees. The latter refused to re#ister the aforesaid transferof shares in the corporate boo4s assertin# that the >ra#asclai$ pre;e$ptive ri#hts over the Abe3o shares and thatBir#inia >ra#a never transferred her shares to Telectronics buthad lost the %ve stoc4 certi%cates representin# those shares.

This tri##ered o the series of intertwined actions betweenthe prota#onists all centered on the 6uestion of 3urisdictionover the dispute. The >ra#as assert that the re#ular civil courthas ori#inal and e'clusive 3urisdiction as a#ainst the , Cwhile the Abe3os and Telectronics as new $a3orityshareholders clai$ the contrary. &espondent Dud#e de la Cru5issued an order rescindin# the order which dis$issed theco$plaint of the >ra#as in the &TC thus holdin# that the &TC

and not the , C had 3urisdiction. &espondent 3ud#e alsorevived the T&E previously issued restrainin# Telectronicsa#ents or representatives fro$ enforcin# their resolutionconstitutin# the$selves as the new set of o cers of 1oc4et>ell and fro$ assu$in# control of the corporation anddischar#in# their functions. The Abe3os %led a 8& which$otion was duly opposed by the >ra#as which was denied byrespondent Dud#e.

ISSUE: (-) ho has 3urisdiction/

(2) EN the corporate secretary $ay refuse tore#ister the transfer of shares in the corporate boo4s.

HELD: (-) The Court ruled that the , C has ori#inal ande'clusive 3urisdiction and that the , C correctly ruled indis$issin# the >ra#as petition 6uestionin# its 3urisdiction

that Gthe issue is not the ownership of shares but rather thenon;perfor$ance by the Corporate ,ecretary of the $inisterialduty of recordin# transfers of shares of stoc4 of theCorporation of which he is secretary.G

The dispute at bar as held by the , C is an intra;corporate dispute that has arisen between and a$on# theprincipal stoc4holders of the corporation 1oc4et >ell due tothe refusal of the corporate secretary bac4ed up by hisparents as erstwhile $a3ority shareholders to perfor$ hisG$inisterial dutyG to record the transfers of the corporation scontrollin# (! @) shares of stoc4 covered by duly endorsed

certi%cates of stoc4 in favor of Telectronics as the purchaserthereof.

(2) NE. As pointed out by the Abe3os 1oc4et >ell isnot a close corporation and no restriction over the freetransferability of the shares appears in the Articles of "ncorporation as well as in the bylaws and the certi%cates of stoc4 the$selves as re6uired by law for the enforce$ent of such restriction. As the , C $aintains GThere is nore6uire$ent that a stoc4holder of a corporation $ust be are#istered one in order that the ,ecurities and 'chan#eCo$$ission $ay ta4e co#ni5ance of a suit see4in# to enforcehis ri#hts as such stoc4holder.G This is because the , C bye'press $andate has Gabsolute 3urisdiction supervision andcontrol over all corporationsG and is called upon to enforce theprovisions of the Corporation Code a$on# which is the stoc4purchaser s ri#ht to secure the correspondin# certi%cate in his

na$e under the provisions of ,ection < of the Code.

CIR vs. THE CLUB ILI!IN"# INC. DE CEBUCase Brief $R No. L%&'(&) * +a, - &) ' * !are/es# J.

ACTS: The Club Filipino is a civic corporation or#ani5edunder the laws of the 1hilippines with an ori#inal authori5edcapital stoc4 of 122 which was subse6uently increased to12 to operate and $aintain a #olf course tennis#y$nasiu$s bowlin# alleys billiard tables and pools and allsorts of #a$es not prohibited by #eneral laws and #eneralordinances and develop and nurture sports of any 4indand any deno$ination for recreation and healthy trainin# of

its $e$bers and shareholdersG (sec. 2 scritura de"ncorporacion (Heed of "ncorporation) del Club Filipino "nc.). There is no provision either in the articles or in the by;lawsrelative to dividends and their distribution althou#h it iscovenanted that upon its dissolution the Club s re$ainin#assets after payin# debts shall be donated to a charitable1hil. "nstitution in Cebu (Art. 27 statutos del (,tatutes of the)Club).

The Club owns and operates a club house a bowlin# alley a#olf course (on a lot leased fro$ the #overn$ent) and a bar;restaurant where it sells wines and li6uors softdrin4s $eals and short orders to its $e$bers and their#uests. The bar-restaurant was a necessary incident to theoperation of the club and its #olf;course. The club is operated$ainly with funds derived fro$ $e$bership fees and dues.

hatever pro%ts it had were used to defray its overhead

e'penses and to i$prove its #olf;course. "n -+!- as a resultof a capital surplus arisin# fro$ the re;valuation of its realproperties the value or price of which increased the Clubdeclared stoc4 dividends= but no actual cash dividends weredistributed to the stoc4holders.

"n -+!2 a >"& a#ent discovered that the Club has never paidpercenta#e ta' on the #ross receipts of its bar and restaurantalthou#h it secured licenses. "n a letter the Collector assesseda#ainst and de$anded fro$ the Club 1-2 *.* - as %'edand percenta#e ta'es surchar#e and co$pro$ise penalty.

- 1+ !++. 7 as percenta#e ta' on its #ross receipts (ta'years -+ ;-+!-) 12


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Also the Collector denied the Club?s re6uest to cancel theassess$ent.

En appeal the CTA reversed the Collector and ruled that theClub is not liable for the assessed ta' liabilities of 1-2 *.*alle#edly due fro$ it as a 4eeper of bar and restaurant as it isa non;stoc4 corporation. 0ence the Collector %led the instantpetition for review.

ISSUE: EN the Club is a stoc4 corporation

HELD: NE. "t is a non;stoc4 corporation.

The facts that the capital stoc4 of the Club is divided intoshares does not detract fro$ the %ndin# of the trial court thatit is not en#a#ed in the business of operator of bar andrestaurant. 01at is /eter2inative of 31et1er or not t1eClub is en4a4e/ in su51 business is its obje5t or6ur6ose# as state/ in its arti5les an/ b,%la3s. The actualpurpose is not controlled by the corporate for$ or by theco$$ercial aspect of the business prosecuted but $ay beshown by e'trinsic evidence includin# the by;laws and the$ethod of operation. Fro$ the e'trinsic evidence adducedthe CTA concluded that the Club is not en#a#ed in thebusiness as a bar4eeper and restaurateur.

For a stoc4 corporation to e'ist two re6uisites $ust beco$plied with:

-. a capital stoc4 divided into shares and2. an authority to distribute to the holders of such shares

dividends or allot$ents of the surplus pro%ts on the basisof the shares held (sec. < Act No. - !+).

Nowhere in its articles of incorporation or by;laws could befound an authority for the distribution of its dividends orsurplus pro%ts. ,trictly spea4in# it cannot therefore beconsidered a stoc4 corporation within the conte$plation of the corpo law.

ISSUE: EN the Club is liable for the pay$ent of 1-2 *.*as %'ed and percenta#e ta'es and surchar#es prescribed insec. -*2 2 -*< < and -+- of the Ta' Code in connection withthe operation of its bar and restaurant= and for 1! asco$pro$ise penalty.

HELD: NE. A ta' is a burden and as such it should not bedee$ed i$posed upon fraternal civic non;pro%t nonstoc4or#ani5ations unless the intent to the contrary is $anifestand patentG (Collector v. >1E l4s Club et al.) which is notthe case here.

0avin# found as a fact that the Club was or#ani5ed to developand cultivate sports of all class and deno$ination for thehealthful recreation and entertain$ent of its stoc4holders and$e$bers= that upon its dissolution its re$ainin# assets afterpayin# debts shall be donated to a charitable 1hil. "nstitutionin Cebu= that it is operated $ainly with funds derived fro$$e$bership fees and dues= that the Club s bar and restaurantcatered only to its $e$bers and their #uests= that there wasin fact no cash dividend distribution to its stoc4holders andthat whatever was derived on retail fro$ its bar andrestaurant was used to defray its overall overhead e'pensesand to i$prove its #olf;course (cost;plus;e'penses;basis) itstands to reason that the Club is not en#a#ed in the businessof an operator of bar and restaurant.

2 Sec. 182, of the Tax Code states, "Unless otherwise provided, every person engaging in a b siness on which the percentage tax is i!posedshall pay in f ll a fixed ann al tax of ten pesos for each calendar year or fraction thereof in which s ch person shall engage in said b siness." Sec. 18 provides in general that "the percentage taxes on b siness shall

be payable at the end of each calendar # arter in the a!o nt lawf lly d eon the b siness transacted d ring each # arter$ etc."

% Sec. 1&1, sa!e Tax Code, provides "'ercentage tax . . . (eepers of resta rants, refresh!ent parlors and other eating places shall pay a taxthree per centum , and )eepers of bar and cafes where wines or li# ors areserved five per centum of their gross receipts . . .".

Ratio: T1e liabilit, for 78e/ an/ 6er5enta4e ta8es# as6rovi/e/ b, t1ese se5tions# /oes not ipso facto atta51b, 2ere reason of t1e o6eration of a bar an/restaurant. or t1e liabilit, to atta51# t1e o6eratort1ereof 2ust be en4a4e/ in t1e business as abar9ee6er an/ restaurateur. The plain and ordinary2eanin4 of business is restri5te/ to a5tivities or a airs31ere 6ro7t is t1e 6ur6ose or liveli1oo/ is t1e 2otive#an/ t1e ter2 business 31en use/ 3it1out ;uali75ation#s1oul/ be 5onstrue/ in its 6lain an/ or/inar, 2eanin4#restri5te/ to a5tivities for 6ro7t or liveli1oo/ (C"& v8anila od#e I CTA -+!+= C"& v. ,weeney et al. -+!+ =8anila 1olo Club v. >. . 8eer -+ ).

The Club derived pro%t fro$ the operation of its bar andrestaurant but such fact does not necessarily convert it into apro%t;$a4in# enterprise. The bar and restaurant arenecessary ad3uncts of the Club to foster its purposes and thepro%ts derived therefro$ are necessarily incidental to thepri$ary ob3ect of developin# and cultivatin# sports for thehealthful recreation and entertain$ent of the stoc4holdersand $e$bers. That a Club $a4es so$e pro%t does not $a4eit a pro%t;$a4in# Club. As has been re$ar4ed a club shouldalways strive whenever possible to have surplus (Desus,acred 0eart Colle#e v. C"& -+! = C"& v. ,inco ducationalCorp. -+! ). A r$ed.

+anuel R. Dula, Enter6rises vs. Court ofA66ealsJ9& +-**+ 27 Au#ust -++oard &esolution -* of thecorporation sold the sub3ect property to spouses 8aria

Theresa and Castrense Beloso in the a$ount of 1< .as evidenced by the Heed of Absolute ,ale. Thereafter TCT-7** was cancelled and TCT 2


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to redee$ the sub3ect property within the one year statutoryperiod for rede$ption Torres %led an A davit of Consolidationof Ewnership -< with the &e#istry of Heeds of 1asay City and

TCT 2 7++ was subse6uently issued to Torres on 2< April-+7+. En - Ectober -+7+ Torres %led a petition for theissuance of a writ of possession a#ainst spouses Beloso and8anuel Hulay in &C Case -7 2;1. 0owever when Bir#ilioHulay appeared in court to intervene in said case alle#in# that8anuel Hulay was never authori5ed by the corporation to sellor $ort#a#e the sub3ect property the trial court ordered

Torres to i$plead the corporation as an indispensable partybut the latter $oved for the dis$issal of his petition whichwas #ranted in an Erder dated * April -+* . En 2 Dune -+*

Torres and d#ardo 1abalan real estate ad$inistrator of Torres %led an action a#ainst the corporation Bir#ilio Hulayand Nepo$uceno &edovan a tenant of Hulay Apart$ent LnitNo. *;A for the recovery of possession su$ of $oney andda$a#es with preli$inary in3unction in Civil Case *-+*;1 withthe then Court of First "nstance of &i5al. En 2- Duly -+* thecorporation %led an action a#ainst spouses Beloso and Torresfor the cancellation of the Certi%cate of ,heri s ,ale and TCT2 7++ in Civil Case *27*;1 with the then Court of First"nstance of &i5al. En 2+ Danuary -+*- 1abalan and Torres %ledan action a#ainst spouses Florentino and lvira 8analastas atenant of Hulay Apart$ent Lnit No. 7;> with the corporationas intervenor for e3ect$ent in Civil Case


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re ers only to shares o stoc! entitled to "ote in the election o directors o a public utility, i#e#, to the total common shares in$%&T#'

Considerin# that co$$on shares have votin# ri#htswhich translate to control as opposed to preferred shareswhich usually have no votin# ri#hts the ter$ PcapitalQ in,ection -- Article O"" of the Constitution refers only toco$$on shares. 0owever if the preferred shares also havethe ri#ht to vote in the election of directors then the ter$PcapitalQ shall include such preferred shares because the ri#htto participate in the control or $ana#e$ent of the corporation

is e'ercised throu#h the ri#ht to vote in the election of directors. "n short the ter$ PcapitalQ in ,ection -- Article O""of the Constitution refers only to shares of stoc4 that can votein the election of directors.

To construe broadly the ter$ PcapitalQ as the totaloutstandin# capital stoc4 includin# both co$$on and non;votin# preferred shares #rossly contravenes the intent andletter of the Constitution that the P,tate shall develop a self;reliant and independent national econo$y e ectivelycontrolled by Filipinos.Q A broad de%nition un3usti%ablydisre#ards who owns the all;i$portant votin# stoc4 whichnecessarily e6uates to control of the public utility.

NDC v A4ri8 $.R. Nos. =>&-'%-- De5e2ber

&?# &))?a5ts:

1res. Hecree No. -7-7 which ordered the rehabilitation of theA#ri' 9roup of Co$panies to be ad$inistered $ainly by the NationalHevelop$ent Co$pany outlined the procedure for %lin#clai$s a#ainstthe A#ri' co$panies and created a Clai$s Co$$ittee to process theseclai$s.

specially relevant to this case is ,ec. (-) thereof providin# that Gall$ort#a#es and other liens presently attachin# to any of the assets of the dissolved corporations are hereby e'tin#uished.G

>efore this the A#ri' 8ar4etin# had e'ecuted in favor of petitioner1hilippine Beterans >an4 a real estate $ort#a#e dated Duly 7 -+7*over three (aRos a#una. Hurin# thee'istence of the $ort#a#e A9&"O went ban4rupt. "t was for thee'pressed purpose of salva#in# this and the other A#ri' co$paniesthat the afore$entioned decree was issued by 1resident 8arcos.

1etitioner %led a clai$ with the A9&"O Clai$s Co$$ittee for thepay$ent of its loan credit . "n the $eanti$e the New A#ri' "nc. andthe National Hevelop$ent Co$pany invo4in# ,ec. (-) of the decree%led a petition with the &e#ional Trial Court of Cala$ba a#una forthe cancellation of the $ort#a#e lien in favor of 1hilippine Beterans.

For its part the 1hilippine Beterans too4 steps toe'tra3udicially foreclose the $ort#a#e pro$ptin# A#ri' to %le a secondcase with the sa$e court to stop the foreclosure.

"n the trial court the 3ud#e annulled not only the challen#ed provisionof ,ec. (-) but the entire 1res. Hecree No. -7-7 on the #rounds that:(-) the presidential e'ercise of le#islative power was a violation of theprinciple of separation of powers= (2) the law i$paired the obli#ation of contracts= and (


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were also swindled. "t is not clear why other co$panies entitled tosi$ilar concern were not si$ilarly treated.

En top of all this New A#ri' "nc. was created by special decreenotwithstandin# the provision of Article O"B ,ection of the -+7atasan# 1a$bansa shall not e'cept by #eneral lawprovide for the for$ation or#ani5ation or re#ulation of privatecorporations unless such corporations are owned or controlled by the9overn$ent or any subdivision or instru$entality thereof.

The new corporation is neither owned nor controlled by the#overn$ent.

T1e Court also feels t1at t1e /e5ree i26airs t1e obli4ation of t1e 5ontra5t bet3een A$RI@ an/ t1e 6rivate res6on/ent3it1out justi75ation. hile it is true that the police power is superiorto the i$pair$ent clause the principle will apply only where thecontract is so related to the public welfare that it will be consideredcon#enitally susceptible to chan#e by the le#islature in the interest of the #reater nu$ber.

"t can be seen that the contracts of loan and $ort#a#e e'ecuted byA9&"O are purely private transactions and have not been shown to bea ected with public interest.

CEASE S CA Case Brief FACT,:

Forrest Cease and %ve (!) other A$erican citi5ens for$ed Tiaon# 8illin# and 1lantation Co$pany. ventually the sharesof the other ori#inal incorporators were bou#ht out by Ceasewith his children. The co$pany?s charter lapsed in Dune -+!*.Forrest Cease died in Au#ust -+!+. There was no $entionwhether there were steps to li6uidate the co$pany. ,o$e of his children wanted an actual division while others wanted areincorporation. Two of his children >en3a$in and Florenceinitiated ,pecial 1roceedin# No.


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8anuel spouses interposed a counterclai$ for unpaid le#alservices by 9re#orio 8anuel in the a$ount of 1! whichwas not paid by the incorporators directors and o cers of Francisco 8otors. The trial court decided the case on 2 Dune-+*! in favor of Francisco 8otors in re#ard to its clai$ for$oney but also allowed the counter;clai$ of the 8anuelspouses. >oth parties appealed. En -! April -++- the Court of Appeals sustained the trial court s decision. 0ence thepresent petition for review on certiorari.

Issue: hether the Francisco 8otors Corporation should beliable for the le#al services of 9re#orio 8anuel rendered in the

intestate proceedin#s over >enita Trinidad?s estate (of theFrancisco fa$ily).

Held: >asic in corporation law is the principle that acorporation has a separate personality distinct fro$ itsstoc4holders and fro$ other corporations to which it $ay beconnected. 0owever under the doctrine of piercin# the veil of corporate entity the corporation s separate 3uridicalpersonality $ay be disre#arded for e'a$ple when thecorporate identity is used to defeat public convenience 3ustifywron# protect fraud or defend cri$e. Also where thecorporation is a $ere alter e#o or business conduit of aperson or where the corporation is so or#ani5ed andcontrolled and its a airs are so conducted as to $a4e it$erely an instru$entality a#ency conduit or ad3unct of another corporation then its distinct personality $ay bei#nored. "n these circu$stances the courts will treat the

corporation as a $ere a##rupation of persons and the liabilitywill directly attach to the$. The le#al %ction of a separatecorporate personality in those cited instances for reasons of public policy and in the interest of 3ustice will be 3usti%ablyset aside. 0erein however #iven the facts and circu$stancesof this case the doctrine of piercin# the corporate veil has norelevant application. The rationale behind piercin# acorporation s identity in a #iven case is to re$ove the barrierbetween the corporation fro$ the persons co$prisin# it tothwart the fraudulent and ille#al sche$es of those who usethe corporate personality as a shield for underta4in# certainproscribed activities. "n the present case instead of holdin#certain individuals or persons responsible for an alle#edcorporate act the situation has been reversed. "t is theFrancisco 8otors Corporation (F8C) as a corporation which isbein# ordered to answer for the personal liability of certain

individual directors o cers and incorporators concerned.0ence the doctrine has been turned upside down because of its erroneous invocation. "n fact the services of 9re#orio8anuel were solicited as counsel for $e$bers of the Franciscofa$ily to represent the$ in the intestate proceedin#s over>enita Trinidad s estate. These estate proceedin#s did notinvolve any business of F8C. 8anuel s $ove to recoverunpaid le#al fees throu#h a counterclai$ a#ainst F8C too set the unpaid balance of the purchase and repair of a 3eepbody could only result fro$ an obvious $isapprehension thatF8C s corporate assets could be used to answer for theliabilities of its individual directors o cers and incorporators.,uch result if per$itted could easily pre3udice the corporationits own creditors and even other stoc4holders= hence clearlyine6uitous to F8C. Further$ore considerin# the nature of thele#al services involved whatever obli#ation saidincorporators directors and o cers of the corporation hadincurred it was incurred in their personal capacity. hendirectors and o cers of a corporation are unable toco$pensate a party for a personal obli#ation it is far;fetchedto alle#e that the corporation is perpetuatin# fraud orpro$otin# in3ustice and be thereby held liable therefor bypiercin# its corporate veil. hile there are no hard and fastrules on disre#ardin# separate corporate identity we $ustalways be $indful of its function and purpose. A court shouldbe careful in assessin# the $ilieu where the doctrine of piercin# the corporate veil $ay be applied. Etherwise anin3ustice althou#h unintended $ay result fro$ its erroneousapplication. The personality of the corporation and those of itsincorporators directors and o cers in their personalcapacities ou#ht to be 4ept separate in this case. The clai$for le#al fees a#ainst the concerned individual incorporators

o cers and directors could not be properly directed a#ainstthe corporation without violatin# basic principles #overnin#corporations. 8oreover every action U includin# acounterclai$ U $ust be prosecuted or defended in the na$eof the real party in interest. "t is plainly an error to lay theclai$ for le#al fees of private respondent 9re#orio 8anuel atthe door of F8C rather than individual $e$bers of theFrancisco fa$ily.

CIR vs Norton an/ Harrison Co26an, Case Brief

1lainti s %led a collection action a#ainst O Corporation. Lpone'ecution of the court s decision O Corporation was found to bewithout assets. Thereafter plainti s %led an action a#ainst itspresent and past stoc4holder S Corporation which ownedsubstantially all of the stoc4s of O corporation. The twocorporations have the sa$e board of directors and S Corporation%nanced the operations of O corporation. 8ay S Corporation beheld liable for the debts of O Corporation/ hy/

A: Ses S Corporation $ay be held liable for the debts of OCorporation. The doctrine of piercin# the veil of corporation %ctionapplies to this case. The two corporations have the sa$e board of directors and S Corporation owned substantially all of the stoc4s of O Corporation which facts 3ustify the conclusion that the latter is$erely an e'tension of the personality of the for$er and that thefor$er controls the policies of the latter. Added to this is the factthat S Corporation controls the %nances of O Corporation which is$erely an ad3unct business conduit or alter e#o of S Corporation.

Li6at vs. !a5i75 Ban9in4 Cor6oration CaseBrief J9& - 2

Facts: The spouses Alfredo ipat and stelita >ur#os ipatowned G>ela s 'port Tradin#G (> T) a sin#le proprietorshipwith principal o ce at No. *- Aurora >oulevard Cubao

ue5on City. > T was en#a#ed in the $anufacture of #ar$ents for do$estic and forei#n consu$ption. The ipatsalso owned the G8ystical FashionsG in the Lnited ,tates whichsells #oods i$ported fro$ the 1hilippines throu#h > T. 8rs.

ipat desi#nated her dau#hter Teresita >. ipat to $ana#e> T in the 1hilippines while she was $ana#in# G8ysticalFashionsG in the Lnited ,tates. "n order to facilitate theconvenient operation of > T stelita ipat e'ecuted on -Hece$ber -+7* a special power of attorney appointin#

Teresita ipat as her attorney;in;fact to obtain loans and othercredit acco$$odations fro$ 1aci%c >an4in# Corporation(1aci%c >an4). ,he li4ewise authori5ed Teresita to e'ecute$ort#a#e contracts on properties owned or co;owned by heras security for the obli#ations to be e'tended by 1aci%c >an4includin# any e'tension or renewal thereof. ,o$eti$e in April-+7+ Teresita by virtue of the special power of attorney wasable to secure for and in behalf of her $other 8rs. ipat and> T a loan fro$ 1aci%c >an4 a$ountin# to 1!*< *! . tobuy fabrics to be $anufactured by > T and e'ported toG8ystical FashionsG in the Lnited ,tates. As security thereforthe ipat spouses as represented by Teresita e'ecuted a &eal

state 8ort#a#e over their property located at No. *- Aurora>lvd. Cubao ue5on City. ,aid property was li4ewise $ade tosecure other additional or new loans etc. En ! ,epte$ber-+7+ > T was incorporated into a fa$ily corporation na$ed>ela s 'port Corporation (> C) in order to facilitate the$ana#e$ent of the business. > C was en#a#ed in thebusiness of $anufacturin# and e'portation of all 4inds of #ar$ents of whatever 4ind and description and utili5ed thesa$e $achineries and e6uip$ent previously used by > T. "tsincorporators and directors included the ipat spouses whoowned a co$bined < shares out of the 2 sharessubscribed Teresita ipat who owned 2 shares and otherclose relatives and friends of the ipats. stelita ipat wasna$ed president of > C while Teresita beca$e the vice;president and #eneral $ana#er. ventually the loan was laterrestructured in the na$e of > C and subse6uent loans were


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obtained by > C with the correspondin# pro$issory notesduly e'ecuted by Teresita on behalf of the corporation. A letterof credit was also opened by 1aci%c >an4 in favor of A. E.

nittin# 8anufacturin# Co. "nc. upon the re6uest of > C after> C e'ecuted the correspondin# trust receipt therefor. 'portbills were also e'ecuted in favor of 1aci%c >an4 for additional%nances. These transactions were all secured by the realestate $ort#a#e over the ipats property. The pro$issorynotes e'port bills and trust receipt eventually beca$e dueand de$andable. Lnfortunately > C defaulted in itspay$ents. After receipt of 1aci%c >an4 s de$and letters

stelita ipat went to the o ce of the ban4 s li6uidator andas4ed for additional ti$e to enable her to personally settle> C s obli#ations. The ban4 acceded to her re6uest but

stelita failed to ful%ll her pro$ise. Conse6uently the realestate $ort#a#e was foreclosed and after co$pliance with there6uire$ents of the law the $ort#a#ed property was sold atpublic auction. En T s1!*< *! . loan only. "n their respective answers 1aci%c>an4 and Trinidad alle#ed in co$$on that petitioners ipatcannot evade pay$ents of the value of the pro$issory notestrust receipt and e'port bills with their property because theyand the > C are one and the sa$e the latter bein# a fa$ilycorporation. Trinidad further clai$ed that he was a buyer in#ood faith and for value and that the ipat spouses areestopped fro$ denyin# > C s e'istence after holdin#the$selves out as a corporation. After trial on the $erits the&TC dis$issed the co$plaint. The ipats ti$ely appealed the&TC decision to the Court of Appeals in CA;9.&. CB -!< .,aid appeal however was dis$issed by the appellate courtfor lac4 of $erit. The ipats then $oved for reconsiderationbut this was denied by the appellate court in its &esolution of 2< February 2 . The ipat spouses %led the petition forreview on certiorari.

Issue: hether > C and > T are separate business entitiesand thus the ipt spouses can isolate the$selves behind thecorporate personality of > C.

Held: hen the corporation is the $ere alter e#o or businessconduit of a person the separate personality of thecorporation $ay be disre#arded. This is co$$only referred toas the Ginstru$entality ruleG or the alter e#o doctrine whichthe courts have applied in disre#ardin# the separate 3uridicalpersonality of corporations. As held in one case where onecorporation is so or#ani5ed and controlled and its a airs areconducted so that it is in fact a $ere instru$entality orad3unct of the other the %ction of the corporate entity of the

instru$entality $ay be disre#arded. The control necessaryto invo4e the rule is not $a3ority or even co$plete stoc4control but such do$ination of %nances policies and practicesthat the controlled corporation has so to spea4 no separate$ind will or e'istence of its own and is but a conduit for itsprincipal. The evidence on record shows > T and > C are notseparate business entities. (-) stelita and Alfredo ipat arethe owners and $a3ority shareholders of > T and > Crespectively= (2) both %r$s were $ana#ed by their dau#hter

Teresita= -+ ( C is a fa$ily

corporation with the ipats as its $a3ority stoc4holders= ( )the business operations of the > C were so $er#ed with thoseof 8rs. ipat such that they were practically indistin#uishable=(7) the corporate funds were held by stelita ipat and thecorporation itself had no visible assets= (*) the board of directors of > C was co$posed of the >ur#os and ipat fa$ily$e$bers= (+) stelita had full control over the activities of and decided business $atters of the corporation= and that(- ) stelita ipat had bene%ted fro$ the loans secured fro$1aci%c >an4 to %nance her business abroad and fro$ thee'port bills secured by > C for the account of G8ysticalFashion.G "t could not have been coincidental that > T and> C are so intertwined with each other in ter$s of ownershipbusiness purpose and $ana#e$ent. Apparently > T and > Care one and the sa$e and the latter is a conduit of and$erely succeeded the for$er. The spouses atte$pt to isolatethe$selves fro$ and hide behind the corporate personality of > C so as to evade their liabilities to 1aci%c >an4 is preciselywhat the classical doctrine of piercin# the veil of corporateentity see4s to prevent and re$edy. > C is a $erecontinuation and successor of > T and the ipat spousescannot evade their obli#ations in the $ort#a#e contractsecured under the na$e of > C on the prete't that it wassi#ned for the bene%t and under the na$e of > T.

Albert vs. Universit, !ublis1in4 Co. < 9.&. No. ;-+--*= Danuary < -+ !)

ACTS: 8ariano Albert entered into a contract with Lniversity1ublishin# Co. "nc. throu#h Dose 8. Arue#o its 1residentwhereby Lniversity would pay plainti for the e'clusive ri#htto publish his revised Co$$entaries on the &evised 1enalCode. The contract stipulated that failure to pay oneinstall$ent would render the rest of the pay$ents due. henLniversity failed to pay the second install$ent Albert sued forcollection and won. 0owever upon e'ecution it was foundthat Lniversity was not re#istered with the , C. Albertpetitioned for a writ of e'ecution a#ainst Dose 8. Arue#o asthe real defendant. Lniversity opposed on the #round thatArue#o was not a party to the case.

ISSUE: EN Arue#o can be held personally liable to theplainti .

HELD: S ,. The ,upre$e Court found that Arue#orepresented a non;e'istent entity and induced not only Albertbut the court to believe in such representation. Arue#oactin# as representative of such non;e'istent principal wasthe real party to the contract sued upon and thus assu$edsuch privile#es and obli#ations and beca$e personally liablefor the contract entered into or for other acts perfor$ed assuch a#ent. Ene who has induced another to act upon hiswilful $isrepresentation that a corporation was duly or#ani5edand e'istin# under the law cannot thereafter set up a#ainsthis victi$ the principle of corporation by estoppel

The ,upre$e Court li4ewise held that the doctrine of corporation by estoppel cannot be set up a#ainst Albert sinceit was Arue#o who had induced hi$ to act upon his (Arue#o s)willful representation that Lniversity had been duly or#ani5edand was e'istin# under the law.

ABS%CBN vs CA Case Brief < $.R. No. &'= )?# anuar, ' &)))

ACTS: "n -++ A>,;C>N and Biva e'ecuted a Fil$ 'hibitionA#ree$ent whereby A>,;C>N was #iven the ri#ht of %rstrefusal to the ne't twenty;four (2 ) Biva %l$s for TB telecastunder such ter$s as $ay be a#reed upon by the partieshereto provided however that such ri#ht shall be e'ercisedby A>,;C>N fro$ the actual o er in writin#. Conse6uentlyBiva throu#h defendant Hel &osario o ered A>,;C>Nthrou#h its vice;president Charo ,antos;Concio a list of three(,;C>N $aye'ercise its ri#ht of %rst refusal under the afore;said


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a#ree$ent. A>, C>N re3ected said list.En February 27 -++2 Hel &osario approached 8s. Conciowith a list consistin# of !2 ori#inal $ovie titles as well as -re;runs fro$ which A>,;C>N $ay choose another !2 titles ora total of -! titles proposin# to sell to A>,;C>N airin# ri#htsover this pac4a#e of !2 ori#inals and !2 re;runs for1 . . The pac4a#e was re3ected by A>,;C>N.

En April -++2 Hel &osario and 8r. 9raciano 9o5on of &>,discussed the ter$s and conditions of Biva?s o er to sell the- %l$s.

En April 7 -++2 defendant Hel &osario received throu#h hissecretary a handwritten note fro$ 8s. Concio which reads:P0ere?s the draft of the contract. " hope you %nd everythin# inorder Q to which was attached a draft e'hibition a#ree$ent acounter;proposal coverin# !< %l$s for a consideration of 1oard of Hirectors.

En April 2+ -++2 Biva #ranted &>, the e'clusive ri#ht to air- Biva;produced andVor ac6uired %l$s includin# thefourteen (- ) %l$s sub3ect of the present case.

A>,;C>N then %led a a co$plaint for speci%c perfor$ance.&TC rendered a decision in favor of &>, and B"BA and a#ainstA>,;C>N rulin# that there was no $eetin# of $inds on theprice and ter$s of the o er. Further$ore the ri#ht of %rstrefusal under the -++ Fil$ 'hibition A#ree$ent hadpreviously been e'ercised per 8s. Concio?s letter to Hel&osario tic4in# o ten titles acceptable to the$ which wouldhave $ade the -++2 a#ree$ent an entirely new contract. TheCourt of Appeals a r$ed the decision of the &TC. 0ence thispetition.

ISSUES-. hether or not there was no perfected contract betweenpetitioner and private respondent2. hether or not A>,;C>N has already e'ercised its ri#ht of %rst refusal

HELD-. The issue should be resolved a#ainst A>,;C>N. Contractsthat are consensual in nature are perfected upon $ere$eetin# of the $inds. Ence there is concurrence between theo er and the acceptance upon the sub3ect $atterconsideration and ter$s of pay$ent a contract is produced.

The o er $ust be certain. To convert the o er into a contractthe acceptance $ust be absolute and $ust not 6ualify theter$s of the o er= it $ust be plain une6uivocalunconditional and without variance of any sort fro$ theproposal. A 6uali%ed acceptance or one that involves a newproposal constitutes a counter;o er and is a re3ection of theori#inal o er. Conse6uently when so$ethin# is desired whichis not e'actly what is proposed in the o er such acceptanceis not su cient to #enerate consent because any $odi%cationor variation fro$ the ter$s of the o er annuls the o er.

ven if it be conceded ar#uendo that Hel &osario hadaccepted the counter;o er the acceptance did not bind B"BAas there was no proof whatsoever that Hel &osario had thespeci%c authority to do so. That Hel &osario did not have theauthority to accept A>,;C>N?s counter;o er was bestevidenced by his sub$ission of the draft contract to B"BA?s>oard of Hirectors for the latter?s approval. "n any event therewas between Hel &osario and ope5 """ no $eetin# of $inds.

2. Ses. A>,;C>N?s ri#ht of %rst refusal had already beene'ercised when 8s. Concio wrote to B"BA tic4in# o ten %l$s.As observed by the trial court the subse6uent ne#otiationwith A>,;C>N was for an entirely di erent pac4a#e. 8s.Concio herself ad$itted on cross;e'a$ination to havin# usedor e'ercised the ri#ht of %rst refusal. ,he stated that the listwas not acceptable and was indeed not accepted by A>,;C>N.Hel &osario hi$self 4new and understood that A>,;C>N haslost its ri#hts of the %rst refusal when his list of < titles werere3ected.

Coastal !a5i75 Tra/in4 vs Sout1ern Rollin4 +ills CaseBrief

ACTS: ,outhern &ollin# 8ills was rena$ed into Bisayan"nte#rated ,teel Corp (B",CE). En Hec. -- -+ -;B",CEobtained a loan fro$ H>1 a$ountin# to 1*< . "t wassecured by a &eal state 8ort#a#e coverin# B",CE s < parcelsof land includin# the $achinery and e6uip$ents therein.,econd oan: B",CE entered a oan A#ree$ent withrespondent ban4s ( referred as GConsortiu$G) to %nance itsi$portation for various raw $aterials. B",CE e'ecuted asecond $ort#a#e over the previous properties $entioned

however they were unrecorded B",CE was unable to pay itssecond $ort#a#e with the consortiu$ which resulted in thelatter ac6uirin# + @ of the e6uity of B",CE #ivin# theConsortiu$ the control and $ana#e$ent of B",CE. Hespitethe ac6uisition B",CE still re$ained indebted to theConsortiu$.

Transaction to Coastal: >etween -+ to -+ ! B",CE entereda processin# a#ree$ent with Coastal wherein Coastaldelivered < $etric tons of hot rolled steel coils whichB",CE would process into bloc4 iron sheets. 0owever B",CEwas only able to return - $etric tons of those sheets.

En the loan to H>1: To pay its %rst $ort#a#e with H>1 B",CEsold 2 of its #enerators to F" 8A9 1hils "nc. H>1 e'ecuted aHeed of Assi#n$ent of the $ort#a#e in favor of theconsortiu$. The Consortiu$ foreclosed the $ort#a#e and was

the hi#hest bidder in an auction sale of B",CE s properties. The Consortiu$ later sold the properties in favor of National,teel Corporation.

Coastal %les a civil action for Annul$ent or &escission of ,aleHa$a#es with 1reli$inary "n3unction. Coastal i$putes badfaith on the action of the Consortiu$ the latter bein# able tosell the properties of B",CE despite the attach$ent of theproperties placin# the$ beyond the reach of B",CE s othercreditors.

The lower court ruled in favor of B",CE declarin# the salevalid and le#al. The CA a r$ed this.

ISSUE -: hether the consortiu$ disposed B",CE s assets infraud of creditors/

HELD: Ses. hat the consortiu$ did was to pay to the$ theproceeds fro$ the sale of the #enerator sets which in turnthey used to pay H>1. Hue to the Heed of Assi#n$ent issuedby H>1 the respondent ban4s recovered what they re$ittedto H>1 I it allowed the Consortiu$ to ac6uire H>1 s pri$arylien on the $ort#a#ed properties. Allowin# the$ as unsecuredcreditors ( as the $ort#a#e was unrecorded) to foreclose onthe assets of the corporation without re#ard to inferior clai$s

ISSUE ': hether petitioner is entitled to $oral da$a#es/

No. As a rule a corporation is not entitled to $oral da$a#esbecause not bein# a natural person it cannot e'periencephysical su erin# or senti$ents li4e wounded feelin#s seriousan'iety $ental an#uish and $oral shoc4. The only e'ceptionto this rule is when the corporation has a #ood reputation thatis debased resultin# in its hu$iliation in the businessreal$. "n the present case the records do not show anyevidence that the na$e or reputation of petitioner has beensullied as a result of the Consortiu$ s fraudulent acts.Accordin#ly $oral da$a#es are not warranted.

1etitioner was able to recover e'e$plary da$a#es.

ar/ine Davies vs. Court of A66ealsJ9& -2* -+ Dune 2 K also $ure oods Corporation "s#Court o Appeals [() 1*+ .',econd Hivision >ellosillo (D): concur

Facts: "n -++2 at the hei#ht of the power crisis which the countrywas then e'periencin# and to re$edy and curtail further losses


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due to the series of power failures 1ure Foods Corporationdecided to install two (2) -! #enerators in its foodprocessin# plant in ,an &o6ue 8ari4ina City. ,o$eti$e inNove$ber -++2 a biddin# for the supply and installation of the#enerators was held. ,everal suppliers and dealers were invited toattend a pre;biddin# conference to discuss the conditions proposesche$e and speci%cations that would best suit the needs of 1L& FEEH,. Eut of the * prospective bidders who attended thepre;biddin# conference only < bidders na$ely Far ast 8ills,upply Corporation (F 8,CE) 8onar4 and Advance 1owersub$itted bid proposals and #ave bid bonds e6uivalent to !@ of their respective bids as re6uired. Thereafter in a letter dated -2Hece$ber -++2 addressed to F 8,CE 1resident Alfonso 1o1L& FEEH, con%r$ed the award of the contract to F 8,CE."$$ediately F 8,CE sub$itted the re6uired perfor$ance bondin the a$ount of 1- * - -*7.+ and contractor s all;ris4 insurancepolicy in the a$ount of 1 -idder s >ond in the a$ount of 1- . asre6uested. ater however in a letter dated 22 Hece$ber -++21L& FEEH, throu#h its ,enior Bice 1resident Teodoro .Hi$ayu#a unilaterally cancelled the award as Gsi#ni%cant factorswere uncovered and brou#ht to (their) attention which dictate(the) cancellation and warrant a total review and re;bid of (the)pro3ect.G Conse6uently F 8,CE protested the cancellation of theaward and sou#ht a $eetin# with 1L& FEEH,. 0owever on 28arch -++< before the $atter could be resolved 1L& FEEH,

already awarded the pro3ect and entered into a contract with DA&H"N N a division of Dardine Havies "nc. (DA&H"N ) whichincidentally was not one of the bidders. F 8,CE thus wrote1L& FEEH, to honor its contract with the for$er and to DA&H"Nto cease and desist fro$ deliverin# and installin# the 2 #eneratorsat 1L& FEEH,. "ts de$and letters unheeded F 8,CE sued both1L& FEEH, and DA&H"N : 1L& FEEH, for rene#in# on itscontract and DA&H"N for its unwarranted interference andinduce$ent. Trial ensued. After F 8,CE presented its evidence

DA&H"N %led a He$urrer to vidence. En 27 Dune -++ the&e#ional Trial Court of 1asi# >ranch * #ranted DA&H"N sHe$urrer to vidence. En 2* Duly -++ the trial court rendered adecision orderin# 1L& FEEH,: (a) to inde$nify F 8,CE the su$of 12 < . representin# the value of en#ineerin# services itrendered= (b) to pay F 8,CE the su$ of L,W- . or its pesoe6uivalent and 1+ . representin# contractor s $ar4;up oninstallation wor4 considerin# that it would be i$possible toco$pel 1L& FEEH, to honor perfor$ and ful%ll its contractualobli#ations in view of 1L& FEEH s contract with DA&H"N andnotin# that construction had already started thereon= (c) to payattorney s fees in an a$ount e6uivalent to 2 @ of the totala$ount due= and (d) to pay the costs. The trial court dis$issedthe counterclai$ %led by 1L& FEEH, for lac4 of factual and le#albasis. >oth F 8,CE and 1L& FEEH, appealed to the Court of Appeals. F 8,CE appealed the 27 Dune -++ &esolution of thetrial court which #ranted the He$urrer to vidence %led by

DA&H"N resultin# in the dis$issal of the co$plaint a#ainst itwhile 1L& FEEH, appealed the 2* Duly -++ Hecision of the sa$ecourt which ordered it to pay F 8,CE. En - Au#ust -++ theCourt of Appeals a r$ed in toto the 2* Duly -++ Hecision of thetrial court. "t also reversed the 27 Dune -++ &esolution of thelower court and ordered DA&H"N to pay F 8,CE da$a#es forinducin# 1L& FEEH, to violate the latter s contract with F 8,CE.As such DA&H"N was ordered to pay F 8,CE 12 . for$oral da$a#es. "n addition 1L& FEEH, was also directed to pay

F 8,CE 12 . as $oral da$a#es and 1- . ase'e$plary da$a#es as well as 2 @ of the total a$ount due asattorney s fees. En y the unilateral cancellation of the contract 1L& FEEH,has acted with bad faith and this was further a##ravated by thesubse6uent in4in# of a contract between 1urefoods and Dardine. "tis very evident that 1urefoods thou#ht that by the e'pedient$eans of $erely writin# a letter would auto$atically cancel ornullify the e'istin# contract entered into by both parties after a

process of biddin#. This is a Ma#rant violation of the e'pressprovisions of the law and is contrary to fair and 3ust dealin#s towhich every $an is due. The Court has awarded in the past $oralda$a#es to a corporation whose reputation has been bes$irched.0erein F 8,CE has su ciently shown that its reputation wastarnished after it i$$ediately ordered e6uip$ent fro$ itssuppliers on account of the ur#ency of the pro3ect only to becanceled later. The Court thus sustain the appellate court s awardof $oral da$a#es. The Court however reduced the award fro$12 . to 1- . as $oral da$a#es are neverintended to enrich the recipient. i4ewise the award of e'e$plaryda$a#es by way of e'a$ple for the public #ood is e'cessive andshould be reduced to 1- . . En the other hand theappellate court erred in orderin# DA&H"N to pay $oral da$a#esto F 8,CE as it supposedly induced 1L& FEEH, to violate thecontract with F 8,CE. hile it $ay see$ that 1L& FEEH, and

DA&H"N connived to deceive F 8,CE there is no speci%cevidence on record to support such perception. i4ewise there isno showin# whatsoever that DA&H"N induced 1L& FEEH,. Thesi$ilarity in the desi#n sub$itted to 1L& FEEH, by both DA&H"Nand F 8,CE and the tender of a lower 6uotation by DA&H"N areinsu cient to show that DA&H"N indeed induced 1L& FEEH, toviolate its contract with F 8,CE.

ili6inas Broa/5astin4 Net3or9 In5. vs. A4o +e/i5alan/ E/u5ational Center%Bi5ol C1ristian Colle4e of+e/i5ine roadcastin# Networ4 "nc.(PF>N"Q). P 'posXQ is heard over e#a5pi City the Albay$unicipalities and other >icol areas. "n the $ornin# of - and-! Hece$ber -+*+ &i$a and Ale#re e'posed various alle#edco$plaints fro$ students teachers and parents a#ainst A#o8edical and ducational Center;>icol Christian Colle#e of 8edicine (PA8 CQ) and its ad$inistrators. Clai$in# that thebroadcasts were defa$atory A8 C and An#elita A#o (PA#oQ)as Hean of A8 C?s Colle#e of 8edicine %led a co$plaint forda$a#es a#ainst F>N" &i$a and Ale#re on 27 February -++ .

The co$plaint further alle#ed that A8 C is a reputablelearnin# institution. ith the supposed e'posXs F>N" &i$aand Ale#re Ptrans$itted $alicious i$putations and as suchdestroyed plainti s? (A8 C and A#o) reputation.Q A8 C and

A#o included F>N" as defendant for alle#edly failin# toe'ercise due dili#ence in the selection and supervision of itse$ployees particularly &i$a and Ale#re. En -* Dune -++F>N" &i$a and Ale#re throu#h Atty. &o5il o5ares %led anAnswer alle#in# that the broadcasts a#ainst A8 C were fairand true. F>N" &i$a and Ale#re clai$ed that they wereplainly i$pelled by a sense of public duty to report theP#oin#s;on in A8 C Jwhich isK an institution i$bued withpublic interest.Q Thereafter trial ensued. Hurin# thepresentation of the evidence for the defense Atty. d$undoCea collaboratin# counsel of Atty. o5ares %led a 8otion toHis$iss on F>N"?s behalf. The trial court denied the $otion todis$iss. Conse6uently F>N" %led a separate Answer clai$in#that it e'ercised due dili#ence in the selection and supervisionof &i$a and Ale#re. F>N" clai$ed that before hirin# abroadcaster the broadcaster should (-) %le an application= (2)be interviewed= and (N" li4ewiseclai$ed that it always re$inds its broadcasters to Pobservetruth fairness and ob3ectivity in their broadcasts and torefrain fro$ usin# libelous and indecent lan#ua#e.Q 8oreoverF>N" re6uires all broadcasters to pass the apisanan n# $#a>rod4aster sa 1ilipinas (P >1Q) accreditation test and tosecure a >1 per$it. En - Hece$ber -++2 the trial courtrendered a Hecision %ndin# F>N" and Ale#re liable for libele'cept &i$a. The trial court held that the broadcasts arelibelous per se. The trial court re3ected the broadcasters? clai$that their utterances were the result of strai#ht reportin#because it had no factual basis. The broadcasters did not evenverify their reports before airin# the$ to show #ood faith. "nholdin# F>N" liable for libel the trial court found that F>N"failed to e'ercise dili#ence in the selection and supervision of


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its e$ployees. "n absolvin# &i$a fro$ the char#e the trialcourt ruled that &i$a?s only participation was when he a#reedwith Ale#re?s e'posX. The trial court found &i$a?s state$entwithin the Pbounds of freedo$ of speech e'pression and of the press.Q >oth parties na$ely F>N" &i$a and Ale#re onone hand and A8 C and A#o on the other appealed thedecision to the Court of Appeals. The Court of Appealsa r$ed the trial court?s 3ud#$ent with $odi%cation. Theappellate court $ade &i$a solidarily liable with F>N" andAle#re. The appellate court denied A#o?s clai$ for da$a#esand attorney?s fees because the broadcasts were directeda#ainst A8 C and not a#ainst her. F>N" &i$a and Ale#re%led a $otion for reconsideration which the Court of Appealsdenied in its 2 Danuary 2 &esolution. 0ence F>N" %led thepetition for review.

Issue: hether A8 C is entitled to $oral da$a#es.

Held: A 3uridical person is #enerally not entitled to $oralda$a#es because unli4e a natural person it cannote'perience physical su erin# or such senti$ents as woundedfeelin#s serious an'iety $ental an#uish or $oral shoc4. TheCourt of Appeals cites 8a$bulao u$ber Co. v. 1N> et al. to

3ustify the award of $oral da$a#es. 0owever the Court?sstate$ent in 8a$bulao that Pa corporation $ay have a #oodreputation which if bes$irched $ay also be a #round for theaward of $oral da$a#esQ is an obiter dictu$. NeverthelessA8 C?s clai$ for $oral da$a#es falls under ite$ 7 of Article22-+ of the Civil Code. This provision e'pressly authori5es the

recovery of $oral da$a#es in cases of libel slander or anyother for$ of defa$ation. Article 22-+(7) does not 6ualifywhether the plainti is a natural or 3uridical person. Thereforea 3uridical person such as a corporation can validly co$plainfor libel or any other for$ of defa$ation and clai$ for $oralda$a#es. 8oreover where the broadcast is libelous per sethe law i$plies da$a#es. "n such a case evidence of anhonest $ista4e or the want of character or reputation of theparty libeled #oes only in $iti#ation of da$a#es. Neither insuch a case is the plainti re6uired to introduce evidence of actual da$a#es as a condition precedent to the recovery of so$e da$a#es. "n this case the broadcasts are libelous perse. Thus A8 C is entitled to $oral da$a#es. 0owever theCourt found the award of 1< $oral da$a#esunreasonable. The record shows that even thou#h thebroadcasts were libelous per se A8 C has not su ered any

substantial or $aterial da$a#e to its reputation. Thereforethe Court reduced the award of $oral da$a#es fro$1< to 1-! .

Cor6orate La3 Case Di4est: !NB . CA e'ecuted its bond wV &ita 9ueco Tapnio asprincipal in favor of the 1N> to #uarantee thepay$ent of Tapnio s account with 1N>.

"nde$nity A#ree$ent wV -2@ int. and -!@ atty. fees

,ept -* -+!7: 1N> sent a letter of de$and for Tapnio to pay the reduced a$ount of 2 de$anded both oral and written but to no avail

Tapnio $ort#a#ed to the ban4 her leasea#ree$ent wV Dacobo Tua5on for herunused e'port su#ar 6uota at 12.* per picular or atotal of 12 * which was $ore than the value of thebond

1N> insisted on raisin# it to 1 should be liable for tort

HELD: S ,. a r$ed.

hile Tapnio had the ulti$ate authority of approvin#or disapprovin# the proposed lease since the 6uotawas $ort#a#ed to the ban4 it certainly CANNETescape its responsibility of observin# for theprotection of the interest of Tapnio and Tua5on thatthe de#ree of care precaution and vi#ilance whichthe circu$stances 3ustly de$and in approvin# ordisapprovin# the lease of said su#ar 6uota

Art. 2- of the Civil Code: any person who wilfullycauses loss or in3ury to another in a $anner that iscontrary to $orals #ood custo$s or public policyshall co$pensate the latter for the da$a#e.

!rofessional Servi5es# In5 . CA


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&TC a#ainst u4an "nc. for a su$ of $oney. The &TC rendereda Hecision in favor of 8orales and a#ainst u4an "nc. After thedecision beca$e %nal and e'ecutory 8orales $oved for andsecured a writ of e'ecution a#ainst u4an "nc. The sheri then levied upon various personal properties of u4an"nternational Corporation ( "C). "C then %led an A davit of

Third;1arty Clai$. Notably "C was incorporated in Au#ust2 or shortly after u4an "nc. had stopped participatin# inCivil Case. "n reaction to the third party clai$ 8oralesinterposed an E$nibus 8otion dated April < 2


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i$posed under ,ection -7! is due on ori#inal issuances of certi%cates of stoc4 and is co$puted based on the a##re#ate parvalue of the shares to be issued= and that these certi%cates of stoc4 are issued only upon full pay$ent of the subscription pricesuch that under the >ureau of "nternal &evenue?s (>"&?s).

&espondent $aintains that the docu$entary sta$p ta' i$posedin this case is on the ori#inal issue of certi%cates of stoc4 of D C onthe subscription by the petitioner of the 1! * * 2 . sharesout of the increase in the authori5ed capital stoc4 of the for$erpursuant to ,ection -7! of the N"&C. The docu$entary sta$p ta'was not i$posed on the shares of stoc4 owned by petitioner in&90C 19C" and LC1> which $erely for$ part of the partial

pay$ent of the subscribed shares in D C. &espondent avers thatthe a$ounts indicated in the Certi%cates of &HE s6uivias are thea$ounts of docu$entary sta$p ta' representin# the e6uivalent of each #roup of shares bein# applied for pay$ent. Considerin# thatthe a$ount of docu$entary sta$p ta' represented by the sharesof stoc4 in the afore$entioned co$panies a$ounted only to1!+< !2*.-! while the basic docu$entary sta$p ta' for theentire subscription of 1! * * 2 . was co$puted byrespondent?s revenue o cers to the tune of 1* < -- .72e'clusive of the penalties leavin# a balance of 12 + !**.!7 is aclear indication that the pay$ent $ade with the shares of stoc4 isinsu cient.

ISSUE: whether or not petitioner is entitled to a partial refund of the docu$entary sta$p ta' and surchar#es it paid on thee'ecution of the A$ended ,ubscription A#ree$ent.

RULIN$: "n clai$s for refund the burden of proof is on the

ta'payer to prove entitle$ent to such refund. "t was thusincu$bent upon petitioner to show clearly its basis for clai$in#that it is entitled to a ta' refund. the petitioner failed to do.

"n the case at bar the ri#hts and obli#ations between petitioner DA A "nvest$ents Corporation and DA A 6uities Corporation areestablished and enforceable at the ti$e the PA$ended,ubscription A#ree$ent and Heed of Assi#n$ent of 1roperty in1ay$ent of ,ubscriptionQ were si#ned by the parties and theirwitness so is the ri#ht of the state to ta' the aforestateddocu$ent evidencin# the transaction. H,T is a ta' on thedocu$ent itself and therefore the rate of ta' $ust be deter$inedon the basis of what is written or indicated on the instru$ent itself independent of any ad3ust$ent which the parties $ay a#ree on inthe future ' ' '. The H,T upon the ta'able docu$ent should bepaid at the ti$e the contract is e'ecuted or at the ti$e thetransaction is acco$plished. The overridin# purpose of the law isthe collection of ta'es. ,o that when it paid in cash the a$ount of

1

docu$entary sta$p ta'es are levied independently of the le#alstatus of the transactions #ivin# rise thereto. The docu$entarysta$p ta'es $ust be paid upon the issuance of the saidinstru$ents without re#ard to whether the contracts which #averise to the$ are rescissible void voidable or unenforceable.

The fact that it was petitioner and not D C that paid for thedocu$entary sta$p ta' on the ori#inal issuance of shares is of no$o$ent as ,ection -7< of the -++ Ta' Code states that thedocu$entary sta$p ta' shall be paid by the person $a4in#si#nin# issuin# acceptin# or transferrin# the property ri#ht orobli#ation.

petition is H",8",, H.

"n4 on4# et al. vs. Tiu# et al. < J9& - 7 * April2 an4 (1N>) for 1-+ $illion. To stave oforeclosure of the $ort#a#e on the two lots where the $all wasbein# built the Tius invited En# Son# Duanita Tan En# ilson T.En# Anna . En# illia$ T. En# and Dulia En# Alon5o (the En#s)to invest in F AHC. Lnder the 1re;,ubscription A#ree$ent theyentered into the En#s and the Tius a#reed to $aintain e6ualshareholdin#s in F AHC: the En#s were to subscribe to -shares at a par value of 1- . each while the Tius were tosubscribe to an additional ! + * shares at 1- . each inaddition to their already e'istin# subscription of ! 2 shares.Further$ore they a#reed that the Tius were entitled to no$inatethe Bice;1resident and the Treasurer plus ! directors while theEn#s were entitled to no$inate the 1resident the ,ecretary and directors (includin# the chair$an) to the board of directors ofF AHC. 8oreover the En#s were #iven the ri#ht to $ana#e andoperate the $all. Accordin#ly the En#s paid 1- $illion in cashfor their subscription to - shares of stoc4 while the Tiusco$$itted to contribute to F AHC a four;storey buildin# and twoparcels of land respectively valued at 12 $illion (for 2shares) 1< $illion (for < shares) and 1 +.* $illion (for

+ * shares) to cover their additional ! + * stoc4subscription therein. The En#s paid in another 17 $illion < toF AHC and 12 $illion to the Tius over and above their 1-$illion invest$ent the total su$ of which (1-+ $illion) was usedto settle the 1-+ $illion $ort#a#e indebtedness of F AHC to1N>. The business har$ony between the En#s and the Tius inF AHC however was shortlived because the Tius on 2< February-++ rescinded the 1re;,ubscription A#ree$ent. The Tiusaccused the En#s of (-) refusin# to credit to the$ the F AHCshares coverin# their real property contributions= (2) preventin#Havid ,. Tiu and Cely S. Tiu fro$ assu$in# the positions of andperfor$in# their duties as Bice;1resident and Treasurerrespectively and (oard &esolution which is -+ Dune -++ = and that the Tiusshall be credited with + * shares in F AHC for their propertycontribution speci%cally the -!- s6. $. parcel of land. The Courta r$ed the fact that both the En#s and the Tius violated theirrespective obli#ations under the 1re;,ubscription A#ree$ent.

En -! 8arch 2 2 the Tius %led before the Court a 8otion for"ssuance of a rit of 'ecution. Aside fro$ their opposition to the

Tius 8otion for "ssuance of rit of 'ecution the En#s %led their


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own G8otion for &econsideration= Alternatively 8otion for8odi%cation (of the February - 2 2 Hecision)G on -! 8arch2 2. i ll ie En# %led a separate G8otion for 1artial&econsiderationG dated * 8arch 2 2 pointin# out that there wasno violation of the 1re;,ubscription A#ree$ent on the part of theEn#s a$on# others. En 2+ Danuary 2 < the ,pecial ,econdHivision of this Court held oral ar#u$ents on the respectivepositions of the parties. En 27 February 2 < Hr. illie En# andthe rest of the $ovants En# %led their respective $e$oranda. En2* February 2 < the Tius sub$itted their $e$orandu$.

Issue [1]: hether the pre;,ubscription A#ree$ent e'ecuted bythe En#s is actually a subscription contract.

Held [1]: F AHC was ori#inally incorporated with an authori5edcapital stoc4 of ! shares with the Tius ownin# ! 2shares representin# the paid;up capital. hen the Tius invited theEn#s to invest in F AHC as stoc4holders an increase of theauthori5ed capital stoc4 beca$e necessary to #ive each #roupe6ual (! ;! ) shareholdin#s as a#reed upon in the 1re;,ubscription A#ree$ent. The authori5ed capital stoc4 was thusincreased fro$ ! shares to 2 shares with a parvalue of 1- each with the En#s subscribin# to - sharesand the Tius to ! + * $ore shares in addition to their ! 2shares to co$plete - shares. Thus the sub3ect $atter of the contract was the - unissued shares of F AHC stoc4allocated to the En#s. ,ince these were unissued shares theparties 1re;,ubscription A#ree$ent was in fact a subscriptioncontract as de%ned under ,ection Title B"" of the CorporationCode. A subscription contract necessarily involves the corporationas one of the contractin# parties since the sub3ect $atter of thetransaction is property owned by the corporation U its shares of stoc4. Thus the subscription contract (deno$inated by the partiesas a 1re;,ubscription A#ree$ent) whereby the En#s invested1- $illion for - shares of stoc4 was fro$ the viewpointof the law one between the En#s and F AHC not between theEn#s and the Tius. Etherwise stated the Tius did not contract intheir personal capacities with the En#s since they were not sellin#any of their own shares to the$. "t was F AHC that did.Considerin# therefore that the real contractin# parties to thesubscription a#ree$ent were F AHC and the En#s alone a civilcase for rescission on the #round of breach of contract %led by the

Tius in their personal capacities will not prosper. Assu$in# it hadvalid reasons to do so only F AHC (and certainly not the Tius) hadthe le#al personality to %le suit rescindin# the subscriptiona#ree$ent with the En#s inas$uch as it was the real party ininterest therein. Article -1). The acrony$ G0.,. .G stands for 0ali#i at,ali#an n# atotohanan. En 2 8arch -++ "HCD;0, %ledbefore the , C a petition (, C Case 1 %led a $otion to dis$isson the #round of lac4 of cause of action. The $otion todis$iss was denied. Thereafter for failure to %le an answerA J"H 0;0, K>1 was declared in default and "HCD;0, wasallowed to present its evidence e' parte. En 2 Nove$ber-++! the , C rendered a decision orderin# A J"H 0;0, K>1to chan#e its corporate na$e. A J"H 0;0, K>1 appealed tothe , C n >anc (, C;AC !1 s corporate na$e was identicalor confusin#ly or deceptively si$ilar to that of "HCD;0, scorporate na$e. A J"H 0;0, K>1 %led a petition for reviewwith the Court of Appeals. En 7 Ectober -++7 the Court of Appeals rendered the decision a r$in# the decision of the, C n >anc. A J"H 0;0, K>1 s $otion for reconsiderationwas denied by the Court of Appeals on - February -++2.A J"H 0;0, K>1 %led the petition for review.

Issue [1]: hether the corporate na$es of A J"H 0;0, K>1and "HC0;0, are confusin#ly si$ilar.

Held [1]: The , C has the authority to de;re#ister at all ti$esand under all circu$stances corporate na$es which in itsesti$ation are li4ely to spawn confusion. "t is the duty of the, C to prevent confusion in the use of corporate na$es notonly for the protection of the corporations involved but $oreso for the protection of the public. ,ection -* of theCorporation Code provides that GNo corporate na$e $ay beallowed by the ,ecurities and 'chan#e Co$$ission if theproposed na$e is identical or deceptively or confusin#lysi$ilar to that of any e'istin# corporation or to any otherna$e already protected by law or is patently deceptiveconfusin# or is contrary to e'istin# laws. hen a chan#e inthe corporate na$e is approved the Co$$ission shall issuean a$ended certi%cate of incorporation under the a$endedna$e.G Corollary thereto the pertinent portion of the , C9uidelines on Corporate Na$es states that G(d) "f theproposed na$e contains a word si$ilar to a word alreadyused as part of the %r$ na$e or style of a re#isteredco$pany the proposed na$e $ust contain two other wordsdi erent fro$ the na$e of the co$pany already re#istered=1arties or#ani5in# a corporation $ust choose a na$e at their

peril= and the use of a na$e si$ilar to one adopted byanother corporation whether a business or a nonpro%tor#ani5ation if $isleadin# or li4ely to in3ure in the e'ercise of its corporate functions re#ardless of intent $ay be preventedby the corporation havin# a prior ri#ht by a suit for in3unctiona#ainst the new corporation to prevent the use of the na$e.0erein the additional words GAn# 8#a aanib G and G,a>ansan# 1ilipinas "nc.G in A J"H 0;0, K>1 s na$e are $erelydescriptive of and also referrin# to the $e$bers or 4aanib of "HC0;0, who are li4ewise residin# in the 1hilippines. Thesewords can hardly serve as an e ective di erentiatin# $ediu$necessary to avoid confusion or di culty in distin#uishin#A J"H 0;0, K>1 fro$ "HC0;0, . This is especially so sinceboth A J"H 0;0, K>1 and "HC0;0, are usin# the sa$eacrony$ U 0.,. .= not to $ention the fact that both areespousin# reli#ious beliefs and operatin# in the sa$e place.


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1arenthetically it is well to $ention that the acrony$ 0.,. .used by A J"H 0;0, K>1 stands for G0ali#i at ,ali#an n#

atotohanan.G Then too the records reveal that in holdin# outtheir corporate na$e to the public A J"H 0;0, K>1 hi#hli#htsthe do$inant words G"9 ,"A N9 H"E, AS &",TE 0 ,L,0A "9" AT ,A "9AN N9 ATETE0ANAN G which is stri4in#lysi$ilar to "HC0;0, s corporate na$e thus $a4in# it even$ore evident that the additional words GAn# 8#a aanibG andG,a >ansan# 1ilipinas "nc.G are $erely descriptive of andpertainin# to the $e$bers of "HC0;0, . ,i#ni%cantly the onlydi erence between the corporate na$es of A J"H 0;0, K>1and "HC0;0, are the words ,A "9AN and ,L0AS. Thesewords are synony$ous U both $ean #round foundation orsupport. 0ence this case is on all fours with Lniversal 8illsCorporation v. Lniversal Te'tile 8ills "nc. 22 where the Courtruled that the corporate na$es Lniversal 8ills Corporationand Lniversal Te'tile 8ills "nc. are undisputably so si$ilarthat even under the test of Greasonable care and observationGconfusion $ay arise.

Issue [2]: hether the #eneric word rule would apply tosupport A J"H 0;0, K>1?s cause.

Held [2]: The wholesale appropriation by A J"H 0;0, K>1 of "HC0;0, s corporate na$e cannot %nd 3usti%cation under the#eneric word rule. A contrary rulin# would encoura#e othercorporations to adopt verbati$ and re#ister an e'istin# andprotected corporate na$e to the detri$ent of the public. Thefact that there are other non;stoc4 reli#ious societies or

corporations usin# the na$es Church of the ivin# 9od "nc.Church of 9od Desus Christ the ,on of 9od the 0ead Church of 9od in Christ I >y the 0oly ,pirit and other si$ilar na$es isof no conse6uence. "t does not authori5e the use by A J"H 0;0, K>1 of the essential and distin#uishin# feature of "HC0;0, s re#istered and protected corporate na$e.

L,5eu2 of t1e !1ili66ines vs. Court ofA66eals < J9& - -*+7 ! 8arch -++a#uio "nc.assailed the Erder of the , C before the ,upre$e Court (9& ;

!+!). "n a 8inute &esolution dated - ,epte$ber -+77 theCourt denied the 1etition for &eview for lac4 of $erit. ntry of

3ud#$ent in that case was $ade on 2- Ectober -+77.

Ar$ed with the &esolution of the ,upre$e Court the yceu$of the 1hilippines then wrote all the educational institutions itcould %nd usin# the word G yceu$G as part of their corporatena$e and advised the$ to discontinue such use of G yceu$.G

hen with the passa#e of ti$e it beca$e clear that thisrecourse had failed and on 2 February -+* yceu$ of the1hilippines instituted before the , C , C;Case 2!7+ toenforce what yceu$ of the 1hilippines clai$s as itsproprietary ri#ht to the word G yceu$.G The , C hearin#o cer rendered a decision sustainin# petitioner s clai$ to ane'clusive ri#ht to use the word G yceu$.G The hearin# o cerrelied upon the , C rulin# in the yceu$ of >a#uio "nc. case(, C;Case -2 -) and held that the word G yceu$G wascapable of appropriation and that petitioner had ac6uired anenforceable e'clusive ri#ht to the use of that word. En appeal

however by yceu$ Ef Aparri yceu$ Ef Caba#an yceu$Ef Ca$alaniu#an "nc. yceu$ Ef allo "nc. yceu$ Ef Tuao"nc. >uhi yceu$ Central yceu$ Ef Catanduanes yceu$Ef ,outhern 1hilippines yceu$ Ef astern 8indanao "nc.and estern 1an#asinan yceu$ "nc. which are alsoeducational institutions to the , C n >anc the decision of the hearin# o cer was reversed and set aside. The , C n>anc did not consider the word G yceu$G to have beco$e soidenti%ed with yceu$ of the 1hilippines as to render usethereof by other institutions as productive of confusion aboutthe identity of the schools concerned in the $ind of the#eneral public. Lnli4e its hearin# o cer the , C n >anc heldthat the attachin# of #eo#raphical na$es to the wordG yceu$G served su ciently to distin#uish the schools fro$one another especially in view of the fact that the ca$pusesof yceu$ of the 1hilippines and those of the other yceu$swere physically 6uite re$ote fro$ each other. yceu$ of the1hilippines then went on appeal to the Court of Appeals. "n itsHecision dated 2* Dune -++- however the Court of Appealsa r$ed the 6uestioned Erders of the , C n >anc. yceu$ of the 1hilippines %led a $otion for reconsideration withoutsuccess. yceu$ of the 1hilippines %led the petition for review.

Issue [1]: hether the na$es of the contendin# yceu$schools are confusin#ly si$ilar.

Held [1]: The Articles of "ncorporation of a corporation $usta$on# other thin#s set out the na$e of the corporation.,ection -* of the Corporation Code establishes a restrictive

rule insofar as corporate na$es are concerned. "t providesthat GNo corporate na$e $ay be allowed by the ,ecurities an

'chan#e Co$$ission if the proposed na$e is identical ordeceptively or confusin#ly si$ilar to that of any e'istin#corporation or to any other na$e already protected by law oris patently deceptive confusin# or contrary to e'istin# laws.

hen a chan#e in the corporate na$e is approved theCo$$ission shall issue an a$ended certi%cate of incorporation under the a$ended na$e.G The policyunderlyin# the prohibition in ,ection -* a#ainst there#istration of a corporate na$e which is Gidentical ordeceptively or confusin#ly si$ilarG to that of any e'istin#corporation or which is Gpatently deceptiveG or Gpatentlyconfusin#G or Gcontrary to e'istin# laws G is the avoidance of fraud upon the public which would have occasion to deal withthe entity concerned the evasion of le#al obli#ations and

duties and the reduction of di culties of ad$inistration andsupervision over corporations. 0erein the Court does notconsider that the corporate na$es of the acade$icinstitutions are Gidentical with or deceptively or confusin#lysi$ilarG to that of yceu$ of the 1hilippines "nc.. True enou#hthe corporate na$es of the other schools (defendantinstitutions) entities all carry the word G yceu$G but confusionand deception are e ectively precluded by the appendin# of #eo#raphic na$es to the word G yceu$.G Thus the G yceu$of AparriG cannot be $ista4en by the #eneral public for theyceu$ of the 1hilippines or that the G yceu$ of

Ca$alaniu#anG would be confused with the yceu$ of the1hilippines. Further ety$olo#ically the word G yceu$G is the

atin word for the 9ree4 ly4eion which in turn referred to alocality on the river "lissius in ancient Athens Gco$prisin# anenclosure dedicated to Apollo and adorned with fountains andbuildin#s erected by 1isistratus 1ericles and ycur#usfre6uented by the youth for e'ercise and by the philosopherAristotle and his followers for teachin#.G "n ti$e the wordG yceu$G beca$e associated with schools and otherinstitutions providin# public lectures and concerts and publicdiscussions. Thus today the word G yceu$G #enerally refersto a school or an institution of learnin#. ,ince G yceu$G orG iceoG denotes a school or institution of learnin# it is notunnatural to use this word to desi#nate an entity which isor#ani5ed and operatin# as an educational institution. Todeter$ine whether a #iven corporate na$e is GidenticalG orGconfusin#ly or deceptively si$ilarG with another entity scorporate na$e it is not enou#h to ascertain the presence of G yceu$G or G iceoG in both na$es. Ene $ust evaluatecorporate na$es in their entirety and when the na$e of

yceu$ of the 1hilippines is 3u'taposed with the na$es of


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private respondents they are not reasonably re#arded asGidenticalG or Gconfusin#ly or deceptively si$ilarG with eachother.

Issue [2]: hether the use by the yceu$ of the 1hilippinesof G yceu$G in its corporate na$e has been for such len#th of ti$e and with such e'clusivity as to have beco$e associatedor identi%ed with the petitioner institution in the $ind of the#eneral public (or at least that portion of the #eneral publicwhich has to do with schools).

Held [2]: The nu$ber alone of the private respondents in thepresent case su##ests stron#ly that the yceu$ of the1hilippines use of the word G yceu$G has not been attendedwith the e'clusivity essential for applicability of the doctrine of secondary $eanin#. "t $ay be noted also that at least one of the private respondents i.e. the estern 1an#asinan yceu$"nc. used the ter$ G yceu$G -7 years before yceu$ of the1hilippines re#istered its own corporate na$e with the , Cand be#an usin# the word G yceu$.G "t follows that if anyinstitution had ac6uired an e'clusive ri#ht to the wordG yceu$ G that institution would have been the estern1an#asinan yceu$ "nc. rather than yceu$ of the1hilippines. 0ence yceu$ of the 1hilippines is not entitled toa le#ally enforceable e'clusive ri#ht to use the word G yceu$Gin its corporate na$e and that other institutions $ay useG yceu$G as part of their corporate na$es.

Cor6orate La3 Case Di4est: !ioneerInsuran5e . CA ranch72 for (a) a declaration of nullity of co$$ercial docu$ents=(b) a refor$ation of contracts= (c) a declaration of ownershipof %shin# boats= (d) an in3unction and (e) da$a#es. i$appealed to the Court of Appeals (CA) which a r$ed the&TC. i$ %led the 1etition for &eview on Certiorari. i$ar#ues a$on# others that under the doctrine of corporationby estoppel liability can be i$puted only to Chua and Saoand not to hi$.

Issue: hether i$ should be held 3ointly liable with Chuaand Sao.

Held: Chua Sao and i$ had decided to en#a#e in a %shin#business which they started by buyin# boats worth 1i$ Ton# i$?s brother. "n their Co$pro$ise A#ree$ent theysubse6uently revealed their intention to pay the loan with theproceeds of the sale of the boats and to divide e6ually a$on#the$ the e'cess or loss. These boats the purchase and therepair of which were %nanced with borrowed $oney fell under
http://www.philippinelegalguide.com/2013/05/jurisprudenc-gr-no-84197-july-28-1989.htmlhttp://www.philippinelegalguide.com/2013/05/jurisprudenc-gr-no-84197-july-28-1989.htmlhttp://www.philippinelegalguide.com/2013/05/jurisprudenc-gr-no-84197-july-28-1989.html


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the ter$ Gco$$on fundG under Article -7 7. The contributionto such fund need not be cash or %'ed assets= it could be anintan#ible li4e credit or industry. That the parties a#reed thatany loss or pro%t fro$ the sale and operation of the boatswould be divided e6ually a$on# the$ also shows that theyhad indeed for$ed a partnership. The partnership e'tendednot only to the purchase of the boat but also to that of thenets and the Moats. The %shin# nets and the Moats bothessential to %shin# were obviously ac6uired in furtherance of their business. "t would have been inconceivable for i$ toinvolve hi$self so $uch in buyin# the boat but not in theac6uisition of the aforesaid e6uip$ent without which thebusiness could not have proceeded. The sale of the boats aswell as the division a$on# the three of the balance re$ainin#after the pay$ent of their loans proves beyond cavil that FV>

ourdes thou#h re#istered in his na$e was not his ownproperty but an asset of the partnership. "t is not unco$$onto re#ister the properties ac6uired fro$ a loan in the na$e of the person the lender trusts who in this case is i$ Ton# i$hi$self. After all he is the brother of the creditor Desus i$. "tis unreasonable U indeed it is absurd U for petitioner to sellhis property to pay a debt he did not incur if the relationshipa$on# the three of the$ was $erely that of lessor;lesseeinstead of partners.

As to i$ s ar#u$ent that under the doctrine of corporationby estoppel liability can be i$puted only to Chua and Saoand not to hi$= ,ection 2- of the Corporation Code of the1hilippines provides that GAll persons who assu$e to act as acorporation 4nowin# it to be without authority to do so shallbe liable as #eneral partners for all debts liabilities andda$a#es incurred or arisin# as a result thereof: 1rovidedhowever That when any such ostensible corporation is suedon any transaction entered by it as a corporation or on anytort co$$itted by it as such it shall not be allowed to use asa defense its lac4 of corporate personality. Ene who assu$esan obli#ation to an ostensible corporation as such cannotresist perfor$ance thereof on the #round that there was infact no corporation.G Thus even if the ostensible corporateentity is proven to be le#ally none'istent a party $ay beestopped fro$ denyin# its corporate e'istence. GThe reasonbehind this doctrine is obvious U an unincorporatedassociation has no personality and would be inco$petent toact and appropriate for itself the power and attributes of acorporation as provided by law= it cannot create a#ents or

confer authority on another to act in its behalf= thus thosewho act or purport to act as its representatives or a#ents doso without authority and at their own ris4. And as it is anele$entary principle of law that a person who acts as ana#ent without authority or without a principal is hi$self re#arded as the principal possessed of all the ri#ht andsub3ect to all the liabilities of a principal a person actin# orpurportin# to act on behalf of a corporation which has no valide'istence assu$es such privile#es and obli#ations andbeco$es personally liable for contracts entered into or forother acts perfor$ed as such a#ent.G The doctrine of corporation by estoppel $ay apply to the alle#ed corporationand to a third party. "n the %rst instance an unincorporatedassociation which represented itself to be a corporation willbe estopped fro$ denyin# its corporate capacity in a suita#ainst it by a third person who relied in #ood faith on such

representation. "t cannot alle#e lac4 of personality to be suedto evade its responsibility for a contract it entered into and byvirtue of which it received advanta#es and bene%ts. En theother hand a third party who 4nowin# an association to beunincorporated nonetheless treated it as a corporation andreceived bene%ts fro$ it $ay be barred fro$ denyin# itscorporate e'istence in a suit brou#ht a#ainst the alle#edcorporation. "n such case all those who bene%ted fro$ thetransaction $ade by the ostensible corporation despite4nowled#e of its le#al defects $ay be held liable forcontracts they i$pliedly assented to or too4 advanta#e of.

There is no dispute that 1F9" is entitled to be paid for the netsit sold. The only 6uestion here is whether i$ should be held

3ointly liable with Chua and Sao. i$ contests such liabilityinsistin# that only those who dealt in the na$e of theostensible corporation should be held liable. Althou#h

technically it is true that i$ did not directly act on behalf of the corporation= however havin# reaped the bene%ts of thecontract entered into by persons with who$ he previously hadan e'istin# relationship he is dee$ed to be part of saidassociation and is covered by the scope of the doctrine of corporation by estoppel.

Corporation Law Digest Compilation

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Transcript of Corporation Law Digest Compilation