Facts: The National Coal Co.(NCC) was created by a special law and was enacted by virtue of Act 27! in order to develop a coal industry. "t was en#a#ed in coal $inin# on reserved lands belon#in# to the #overn$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: 1lainti2 is a private corporation. The $ere fact that the #overn$ent is a $a3ority stoc4holder of the corporation does not $a4e the corporation. Act 27! as a$ended by Act 2*22 $a4es it sub3ect to all the provision of the corporation law. As a private corporation) it has no #reater ri#hts) powers or privile#es than any other corporation which $ay be or#ani5ed for the sa$e purpose under the corporation law and certainly it was not the intention of the le#islature to #ive preference or ri#ht or privile#e over other le#iti$ate private corporation in the $inin# of coal. NCC is re6uired to pay ta'es pursuant to ,ection -(+7 of the Ad$inistrative Code. 8oreover) Act 27-+ is applicable only to lessee or owner of coal bearin# lands which NCC is not. Abejo vs. De la Cruz 9.&. No. :;7<!!*= 8ay -+) -+*7 FACT,: Case involves a dispute between the principal stoc4holders of the corporation 1oc4et >ell 1hilippines) "nc. (1oc4et >ell) na$ely spouses Abe3os? and the purchaser) Telectronic ,yste$s) "nc. (Telectronics) of their $inority shareholdin#s and of shares re#istered in the na$e of spouses >ra#as?. .ith the said purchases) Telectronics would beco$e the $a3ority stoc4holder) holdin# !7@ of the outstandin# stoc4 and votin# power of the corporation 1oc4et >ell. Telectronics re6uested the corporate secretary of the corporation) Norberto >ra#a) to re#ister and transfer to its na$e) and those of its no$inees the total -+7) 1oc4et >ell shares in the corporationAs transfer boo4) cancel the surrendered certi%cates of stoc4 and issue the correspondin# new certi%cates of stoc4 in its na$e and those of its no$inees. The latter refused to re#ister the aforesaid transfer of shares in the corporate boo4s) assertin# that the >ra#as clai$ pre;e$ptive ri#hts over the Abe3o shares and that Bir#inia >ra#a never transferred her shares to Telectronics but had lost the %ve stoc4 certi%cates representin# those shares. This tri##ered o2 the series of intertwined actions between the prota#onists) all centered on the 6uestion of 3urisdiction over the dispute. The >ra#as assert that the re#ular civil court has ori#inal and e'clusive 3urisdiction as a#ainst the ,CC) while the Abe3os and Telectronics) as new $a3ority shareholders) clai$ the contrary. &espondent Dud#e de la Cru5 issued an order rescindin# the order which dis$issed the co$plaint of the >ra#as in the &TC) thus holdin# that the &TC and not the ,CC had 3urisdiction. &espondent 3ud#e also revived the T&E previously issued restrainin# TelectronicsA a#ents or representatives fro$ enforcin# their resolution constitutin# the$selves as the new set of oFcers of 1oc4et >ell and fro$ assu$in# control of the corporation and dischar#in# their functions. The Abe3os %led a 8&) which $otion was duly opposed by the >ra#as) which was denied by respondent Dud#e. ISSUE: (-) .ho has 3urisdiction/ (2) .EN the corporate secretary $ay refuse to re#ister the transfer of shares in the corporate boo4s. HELD: (-) The Court ruled that the ,CC has ori#inal and e'clusive 3urisdiction and that the ,CC correctly ruled in dis$issin# the >ra#asA petition 6uestionin# its 3urisdiction) that Gthe issue is not the ownership of shares but rather the non;perfor$ance by the Corporate ,ecretary of the $inisterial duty of recordin# transfers of shares of stoc4 of the Corporation of which he is secretary.G The dispute at bar) as held by the ,CC) is an intra; corporate dispute that has arisen between and a$on# the principal stoc4holders of the corporation 1oc4et >ell due to the refusal of the corporate secretary) bac4ed up by his parents as erstwhile $a3ority shareholders) to perfor$ his G$inisterial dutyG to record the transfers of the corporationAs controllin# (!7@) shares of stoc4) covered by duly endorsed certi%cates of stoc4) in favor of Telectronics as the purchaser thereof. (2) NE. As pointed out by the Abe3os) 1oc4et >ell is not a close corporation) and no restriction over the free transferability of the shares appears in the Articles of "ncorporation) as well as in the bylaws and the certi%cates of stoc4 the$selves) as re6uired by law for the enforce$ent of such restriction. As the ,CC $aintains) GThere is no re6uire$ent that a stoc4holder of a corporation $ust be a re#istered one in order that the ,ecurities and C'chan#e Co$$ission $ay ta4e co#ni5ance of a suit see4in# to enforce his ri#hts as such stoc4holder.G This is because the ,CC by e'press $andate has Gabsolute 3urisdiction) supervision and control over all corporationsG and is called upon to enforce the provisions of the Corporation Code) a$on# which is the stoc4 purchaserAs ri#ht to secure the correspondin# certi%cate in his na$e under the provisions of ,ection 7< of the Code. CIR vs. THE CLUB ILI!IN"# INC. DE CEBU Case Brief $R No. L%&'(&) * +a, -&# &).' * !are/es# J. ACTS: The Club Filipino) is a civic corporation or#ani5ed under the laws of the 1hilippines with an ori#inal authori5ed capital stoc4 of 122)) which was subse6uently increased to 12) to operate and $aintain a #olf course) tennis) #y$nasiu$s) bowlin# alleys) billiard tables and pools) and all sorts of #a$es not prohibited by #eneral laws and #eneral ordinances) and develop and nurture sports of any 4ind and any deno$ination for recreation and healthy trainin# of its $e$bers and shareholdersG (sec. 2) Cscritura de "ncorporacion (Heed of "ncorporation) del Club Filipino) "nc.). There is no provision either in the articles or in the by;laws relative to dividends and their distribution) althou#h it is covenanted that upon its dissolution) the ClubAs re$ainin# assets) after payin# debts) shall be donated to a charitable 1hil. "nstitution in Cebu (Art. 27) Cstatutos 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) soft drin4s) $eals and short orders to its $e$bers and their #uests. The bar-restaurant was a necessary incident to the operation 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 result of a capital surplus) arisin# fro$ the re;valuation of its real properties) the value or price of which increased) the Club declared stoc4 dividends= but no actual cash dividends were distributed to the stoc4holders. "n -+!2) a >"& a#ent discovered that the Club has never paid percenta#e ta' on the #ross receipts of its bar and restaurant) althou#h it secured licenses. "n a letter) the Collector assessed a#ainst and de$anded fro$ the Club 1-2)7*.*( - as %'ed and percenta#e ta'es) surchar#e and co$pro$ise penalty. - 1+) !++.7 as percenta#e ta' on its #ross receipts (ta' years -+(7;-+!-)) 12)<++.77 surchar#e) 17 %'ed ta' (ta' years -+(7;-+!2) and 1! co$pro$ise penalty. Also) the Collector denied the Club?s re6uest to cancel the assess$ent. En appeal) the CTA reversed the Collector and ruled that the Club is not liable for the assessed ta' liabilities of 1-2)7*.*( alle#edly due fro$ it as a 4eeper of bar and restaurant as it is a non;stoc4 corporation. 0ence) the Collector %led the instant petition 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 into shares) does not detract fro$ the %ndin# of the trial court that it is not en#a#ed in the business of operator of bar and restaurant. 01at is /eter2inative of 31et1er or not t1e Club is en4a4e/ in su51 business is its obje5t or 6ur6ose# as state/ in its arti5les an/ b,%la3s. The actual purpose is not controlled by the corporate for$ or by the co$$ercial aspect of the business prosecuted) but $ay be shown by e'trinsic evidence) includin# the by;laws and the $ethod of operation. Fro$ the e'trinsic evidence adduced) the CTA concluded that the Club is not en#a#ed in the business as a bar4eeper and restaurateur. For a stoc4 corporation to e'ist) two re6uisites $ust be co$plied with: -. a capital stoc4 divided into shares and 2. an authority to distribute to the holders of such shares) dividends or allot$ents of the surplus pro%ts on the basis of the shares held (sec. <) Act No. -(!+). Nowhere in its articles of incorporation or by;laws could be found an authority for the distribution of its dividends or surplus pro%ts. ,trictly spea4in#) it cannot) therefore) be considered a stoc4 corporation) within the conte$plation of the corpo law. ISSUE: .EN the Club is liable for the pay$ent of 1-2)7*.*() as %'ed and percenta#e ta'es and surchar#es prescribed in sec. -*2 2 ) -*< < and -+- ( of the Ta' Code) in connection with the operation of its bar and restaurant= and for 1! as co$pro$ise penalty. HELD: NE. A ta' is a burden) and) as such) it should not be dee$ed i$posed upon fraternal) civic) non;pro%t) nonstoc4 or#ani5ations) unless the intent to the contrary is $anifest and patentG (Collector v. >1EC Cl4s Club) et al.)) which is not the case here. 0avin# found as a fact that the Club was or#ani5ed to develop and cultivate sports of all class and deno$ination) for the healthful recreation and entertain$ent of its stoc4holders and $e$bers= that upon its dissolution) its re$ainin# assets) after payin# debts) shall be donated to a charitable 1hil. "nstitution in Cebu= that it is operated $ainly with funds derived fro$ $e$bership fees and dues= that the ClubAs bar and restaurant catered only to its $e$bers and their #uests= that there was in fact no cash dividend distribution to its stoc4holders and that whatever was derived on retail fro$ its bar and restaurant was used to defray its overall overhead e'penses and to i$prove its #olf;course (cost;plus;e'penses;basis)) it stands to reason that the Club is not en#a#ed in the business of an operator of bar and restaurant. 2 Sec. 182, of the Tax Code states, "Unless otherwise provided, every person engaging in a bsiness on which the percentage tax is i!posed shall pay in fll a fixed annal tax of ten pesos for each calendar year or fraction thereof in which sch person shall engage in said bsiness." " Sec. 18" provides in general that "the percentage taxes on bsiness shall be payable at the end of each calendar #arter in the a!ont lawflly de on the bsiness transacted dring each #arter$ etc." % Sec. 1&1, sa!e Tax Code, provides "'ercentage tax . . . (eepers of restarants, refresh!ent parlors and other eating places shall pay a tax three per centum, and )eepers of bar and cafes where wines or li#ors are served five per centum of their gross receipts . . .". Ratio: T1e liabilit, for 78e/ an/ 6er5enta4e ta8es# as 6rovi/e/ b, t1ese se5tions# /oes not ipso facto atta51 b, 2ere reason of t1e o6eration of a bar an/ restaurant. or t1e liabilit, to atta51# t1e o6erator t1ereof 2ust be en4a4e/ in t1e business as a bar9ee6er an/ restaurateur. The plain and ordinary 2eanin4 of business is restri5te/ to a5tivities or a:airs 31ere 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"& v. 8anila :od#e I CTA) -+!+= C"& v. ,weeney) et al.) -+!+)= 8anila 1olo Club v. >. :. 8eer) -+7). The Club derived pro%t fro$ the operation of its bar and restaurant) but such fact does not necessarily convert it into a pro%t;$a4in# enterprise. The bar and restaurant are necessary ad3uncts of the Club to foster its purposes and the pro%ts derived therefro$ are necessarily incidental to the pri$ary ob3ect of developin# and cultivatin# sports for the healthful recreation and entertain$ent of the stoc4holders and $e$bers. That a Club $a4es so$e pro%t) does not $a4e it a pro%t;$a4in# Club. As has been re$ar4ed a club should always strive) whenever possible) to have surplus (Desus ,acred 0eart Colle#e v. C"&) -+!(= C"& v. ,inco Cducational Corp.) -+!7). AFr$ed. +anuel R. Dula, Enter6rises vs. Court of A66eals J9& +-**+) 27 Au#ust -++<K ,econd Hivision) Nocon (D): < concur) - too4 no part Facts: 8anuel &.Hulay Cnterprises) "nc.) a do$estic corporation with the followin# as $e$bers of its >oard of Hirectors: 8anuel &. Hulay with -+)+7 shares and desi#nated as president) treasurer and #eneral $ana#er= Atty. Bir#ilio C. Hulay with - shares and desi#nated as vice;president= :inda C. Hulay with - shares= Celia Hulay;8endo5a with - shares= and Atty. 1laridel C. Dose with - shares and desi#nated as secretary) owned a property covered by TCT -7** ( and 4nown as Hulay Apart$ent consistin# of -7 apart$ent units on a 7*+ s6uare $eter lot) $ore or less) located at ,eventh ,treet (now >uendia C'tension) and F.>. 0arrison ,treet) 1asay City. The corporation throu#h its president) 8anuel Hulay) obtained various loans for the construction of its hotel pro3ect) Hulay Continental 0otel (now Frederic4 0otel). "t even had to borrow $oney fro$ Bir#ilio Hulay to be able to continue the hotel pro3ect. As a result of said loan) Bir#ilio Hulay occupied one of the unit apart$ents of the sub3ect property since -+7< while at the sa$e ti$e $ana#in# the Hulay Apart$ent as his shareholdin#s in the corporation was subse6uently increased by his father. En 2< Hece$ber -+77) 8anuel Hulay by virtue of >oard &esolution -* of the corporation sold the sub3ect property to spouses 8aria Theresa and Castrense Beloso in the a$ount of 1<). as evidenced by the Heed of Absolute ,ale. Thereafter) TCT -7** was cancelled and TCT 2<22! was issued to 8aria Theresa Beloso. ,ubse6uently) 8anuel Hulay and the spouses Beloso e'ecuted a 8e$orandu$ to the Heed of Absolute ,ale of 2< Hece$ber -+77 dated + Hece$ber -+77 #ivin# 8anuel Hulay within 2 years or until + Hece$ber -+7+ to repurchase the sub3ect property for 12). which was) however) not annotated either in TCT -7** or TCT 2<22!. En 2( Hece$ber -+77) 8aria Beloso) without the 4nowled#e of 8anuel Hulay) $ort#a#ed the sub3ect property to 8anuel A. Torres for a loan of 12!). which was duly annotated as Cntry 7*-<+ in TCT 2<22!. Lpon the failure of 8aria Beloso to pay Torres) the sub3ect property was sold on ! April -+7* to Torres as the hi#hest bidder in an e'tra3udicial foreclosure sale as evidenced by the Certi%cate of ,heri2As ,ale issued on 2 April -+7*. En 2 Duly -+7*) 8aria Beloso e'ecuted a Heed of Absolute Assi#n$ent of the &i#ht to &edee$ in favor of 8anuel Hulay assi#nin# her ri#ht to repurchase the sub3ect property fro$ Torres as a result of the e'tra3udicial sale. As neither 8aria Beloso nor her assi#nee 8anuel Hulay was able to redee$ the sub3ect property within the one year statutory period for rede$ption) Torres %led an AFdavit of Consolidation of 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 the issuance of a writ of possession a#ainst spouses Beloso and 8anuel Hulay in :&C Case -7(2;1. 0owever) when Bir#ilio Hulay appeared in court to intervene in said case alle#in# that 8anuel Hulay was never authori5ed by the corporation to sell or $ort#a#e the sub3ect property) the trial court ordered Torres to i$plead the corporation as an indispensable party but the latter $oved for the dis$issal of his petition which was #ranted in an Erder dated * April -+*. En 2 Dune -+*) Torres and Cd#ardo 1abalan) real estate ad$inistrator of Torres) %led an action a#ainst the corporation) Bir#ilio Hulay and Nepo$uceno &edovan) a tenant of Hulay Apart$ent Lnit No. *;A for the recovery of possession) su$ of $oney and da$a#es with preli$inary in3unction in Civil Case *-+*;1 with the then Court of First "nstance of &i5al. En 2- Duly -+*) the corporation %led an action a#ainst spouses Beloso and Torres for the cancellation of the Certi%cate of ,heri2As ,ale and TCT 2(7++ in Civil Case *27*;1 with the then Court of First "nstance of &i5al. En 2+ Danuary -+*-) 1abalan and Torres %led an action a#ainst spouses Florentino and Clvira 8analastas) a tenant of Hulay Apart$ent Lnit No. 7;>) with the corporation as intervenor for e3ect$ent in Civil Case <*;*- with the 8etropolitan Trial Court of 1asay City which rendered a decision on 2! April -+*!) in favor of 1abalan) et al.) orderin# the spouses 8analastas and all persons clai$in# possession under the$ to vacate the pre$ises= and to pay the rents in the su$ of 1!. a $onth fro$ 8ay -+7+ until they shall have vacated the pre$ises with interest at the le#al rate= and to pay attorneyAs fees in the su$ of 12). and 1-). as other e'penses of liti#ation and for the$ to pay the costs of the suit. Thereafter or on -7 8ay -+*!) the corporation and Bir#ilio Hulay %led an action a#ainst the presidin# 3ud#e of the 8etropolitan Trial Court of 1asay City) 1abalan and Torres for the annul$ent of said decision with the &e#ional Trial Court of 1asay in Civil Case 2**;1. Thereafter) the < cases were 3ointly tried and the trial court rendered a decision in favor of 1abalan and Torres. Not satis%ed with said decision) the corporation) et al. appealed to the Court of Appeals which rendered a decision on 2< Ectober -+*+) aFr$in# the trial court decision. En * Nove$ber -+*+) the corporation) et al. %led a 8otion for &econsideration which was denied on 27 Danuary -++. The corporation) et al. %led the petition for review on certiorari. Hurin# the pendency of the petition) Torres died on < April -++- as shown in his death certi%cate and na$ed Torres;1abalan &ealty I Hevelop$ent Corporation as his heir in his holo#raphic will dated <- Ectober -+*7. Issue: .hether the sale of the sub3ect property between spouses Beloso and 8anuel Hulay has no bindin# e2ect on the corporation as >oard &esolution -* which authori5ed the sale of the sub3ect property was resolved without the approval of all the $e$bers of the board of directors and said >oard &esolution was prepared by a person not desi#nated by the corporation to be its secretary. Held: ,ection -- of the Corporation Code of the 1hilippines provides that G.hen board $eetin# is unnecessary or i$properly held. Lnless the by;laws provide otherwise) any action by the directors of a close corporation without a $eetin# shall nevertheless be dee$ed valid if: (-) >efore or after such action is ta4en) written consent thereto is si#ned by all the directors= or (2) All the stoc4holders have actual or i$plied 4nowled#e of the action and $a4e no pro$pt ob3ection thereto in writin#= or (<) The directors are accusto$ed to ta4e infor$al action with the e'press or i$plied ac6uiesce of all the stoc4holders= or (() All the directors have e'press or i$plied 4nowled#e of the action in 6uestion and none of the$ $a4es pro$pt ob3ection thereto in writin#. "f a directorsA $eetin# is held without proper call or notice) an action ta4en therein within the corporate powers is dee$ed rati%ed by a director who failed to attend) unless he pro$ptly %les his written ob3ection with the secretary of the corporation after havin# 4nowled#e thereof.G 0erein) the corporation is classi%ed as a close corporation and conse6uently a board resolution authori5in# the sale or $ort#a#e of the sub3ect property is not necessary to bind the corporation for the action of its president. At any rate) a corporate action ta4en at a board $eetin# without proper call or notice in a close corporation is dee$ed rati%ed by the absent director unless the latter pro$ptly %les his written ob3ection with the secretary of the corporation after havin# 4nowled#e of the $eetin# which) in this case) Bir#ilio Hulay failed to do. The corporationAs clai$ that the sale of the sub3ect property by its president) 8anuel Hulay) to spouses Beloso is null and void as the alle#ed >oard &esolution -* was passed without the 4nowled#e and consent of the other $e$bers of the board of directors cannot be sustained. Bir#ilio C. HulayAs protestations of co$plete innocence to the e2ect that he never participated nor was even aware of any $eetin# or resolution authori5in# the $ort#a#e or sale of the sub3ect pre$ises is diFcult to believe. En the contrary) he is very $uch privy to the transactions involved. To be#in with) he is an incorporator and one of the board of directors desi#nated at the ti$e of the or#ani5ation of 8anuel &. Hulay Cnterprises) "nc. "n ordinary parlance) the said entity is loosely referred to as a Gfa$ily corporation.G The no$enclature) if i$precise) however) fairly reMects the cohesiveness of a #roup and the parochial instincts of the individual $e$bers of such an a##rupation of which 8anuel &. Hulay Cnterprises) "nc. is typical: four;%fths of its incorporators bein# close relatives na$ely) < children and their father whose na$e identi%es their corporation. >esides) the fact that Bir#ilio Hulay on 2( Dune -+7! e'ecuted an aFdavit that he was a si#natory witness to the e'ecution of the post;dated Heed of Absolute ,ale of the sub3ect property in favor of Torres indicates that he was aware of the transaction e'ecuted between his father and Torres and had) therefore) ade6uate 4nowled#e about the sale of the sub3ect property to Torres. Conse6uently) the corporation is liable for the act of 8anuel Hulay and the sale of the sub3ect property to Torres by 8anuel Hulay is valid and bindin#. $a2boa vs. Teves <9.&. No. -77!7+= Dune 2*) 2--) ACTS: This is a petition to nullify the sale of shares of stoc4 of 1hilippine Teleco$$unications "nvest$ent Corporation (1T"C) by the #overn$ent of the &epublic of the 1hilippines) actin# throu#h the "nter;A#ency 1rivati5ation Council ("1C)) to 8etro 1aci%c Assets 0oldin#s) "nc. (81A0)) an aFliate of First 1aci%c Co$pany :i$ited (First 1aci%c)) a 0on# Non#;based invest$ent $ana#e$ent and holdin# co$pany and a shareholder of the 1hilippine :on# Histance Telephone Co$pany (1:HT). The petitioner 6uestioned the sale on the #round that it also involved an indirect sale of -2 $illion shares (or about 7.< percent of the outstandin# co$$on shares) of 1:HT owned by 1T"C to First 1aci%c. .ith this sale) First 1aci%c?s co$$on shareholdin#s in 1:HT increased fro$ <.7 percent to <7 percent) thereby increasin# the total co$$on shareholdin#s of forei#ners in 1:HT to about *-.(7@. This) accordin# to the petitioner) violates ,ection --) Article O"" of the -+*7 1hilippine Constitution which li$its forei#n ownership of the capital of a public utility to not $ore than (@) thus: ,ection --. No franchise) certi%cate) or any other for$ of authori5ation for the operation of a public utility shall be #ranted e'cept to citi5ens of the 1hilippines or to corporations or associations or#ani5ed under the laws of the 1hilippines) at least si'ty per centu$ of whose capital is owned by such citi5ens= ' ' ' ISSUE: Hoes the ter$ PcapitalQ in ,ection --) Article O"" of the Constitution refer to the total co$$on shares only) or to the total outstandin# capital stoc4 (co$bined total of co$$on and non;votin# preferred shares) of 1:HT) a public utility/ HELD: [The Court partly granted the petition and held that the term capital in Section 11, Article XII o the Constitution reers 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$$on shares have votin# ri#hts which translate to control) as opposed to preferred shares which usually have no votin# ri#hts) the ter$ PcapitalQ in ,ection --) Article O"" of the Constitution refers only to co$$on shares. 0owever) if the preferred shares also have the ri#ht to vote in the election of directors) then the ter$ PcapitalQ shall include such preferred shares because the ri#ht to 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 vote in the election of directors. To construe broadly the ter$ PcapitalQ as the total outstandin# capital stoc4) includin# both co$$on and non; votin# preferred shares) #rossly contravenes the intent and letter of the Constitution that the P,tate shall develop a self; reliant and independent national econo$y e2ectively controlled by Filipinos.Q A broad de%nition un3usti%ably disre#ards who owns the all;i$portant votin# stoc4) which necessarily e6uates to control of the public utility. NDC v A4ri8 $.R. Nos. =>&-'%-- De5e2ber &?# &))? a5ts: 1res. Hecree No. -7-7) which ordered the rehabilitation of the A#ri' 9roup of Co$panies to be ad$inistered $ainly by the National Hevelop$ent Co$pany) outlined the procedure for %lin#clai$s a#ainst the A#ri' co$panies and created a Clai$s Co$$ittee to process these clai$s. Cspecially 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 petitioner 1hilippine Beterans >an4 a real estate $ort#a#e dated Duly 7) -+7*) over three (<) parcels of land situated in :os >aRos) :a#una. Hurin# the e'istence of the $ort#a#e) A9&"O went ban4rupt. "t was for the e'pressed purpose of salva#in# this and the other A#ri' co$panies that the afore$entioned decree was issued by 1resident 8arcos. 1etitioner %led a clai$ with the A9&"O Clai$s Co$$ittee for the pay$ent of its loan credit. "n the $eanti$e) the New A#ri') "nc. and the National Hevelop$ent Co$pany) invo4in# ,ec. ( (-) of the decree) %led a petition with the &e#ional Trial Court of Cala$ba) :a#una) for the cancellation of the $ort#a#e lien in favor of 1hilippine Beterans. For its part) the 1hilippine Beterans too4 steps to e'tra3udicially foreclose the $ort#a#e) pro$ptin# A#ri' to %le a second case with the sa$e court to stop the foreclosure. "n the trial court) the 3ud#e annulled not only the challen#ed provision of ,ec. ( (-)) but the entire 1res. Hecree No. -7-7 on the #rounds that: (-) the presidential e'ercise of le#islative power was a violation of the principle of separation of powers= (2) the law i$paired the obli#ation of contracts= and (<) the decree violated the e6ual protection clause. The $otion for reconsideration of this decision havin# been denied) the present petition was %led in the ,upre$e Court. The petitioners contend that the private respondent is now estopped fro$ contestin# the validity of the decree. They cited 8endo5a v. A#ri' 8ar4etin#) "nc.)- where the constitutionality of 1res. Hecree No. -7-7 was also raised but not resolved. 8oreover the clai$s co$$ittee dis$issed the %lin# of the petition by 1hilippine Beterans on the #round of the afore$entioned estoppel. The petitioners stress that in that the private respondent also invo4ed the provisions of 1res. Hecree No. -7-7 by %lin# a clai$ with the A9&"O Clai$s Co$$ittee. Failin# to #et results) it sou#ht to foreclose the real estate $ort#a#e e'ecuted by A9&"O in its favor) which had been e'tin#uished by the decree. "t was only when the petitioners challen#ed the foreclosure on the basis of ,ec. ( (-) of the decree) that the private respondent attac4ed the validity of the provision. At that sta#e) however) consistent with 8endo5a) the petitioners alle#ed that private respondent was already estopped fro$ 6uestionin# the constitutionality of the decree. Issues: -. "s estoppel applicable/ 2. "s 1H -7-7 constitutional/ Hel/: No. Ses. petition dis$issed &atio: -. To rule now that the private respondent is estopped for havin# abided with the decree instead of boldly assailin# it is to close our eyes to a cynical fact of life durin# the 8arcos ti$e. This case $ust be distin#uished fro$ 8endo5a) where the petitioners) after %lin# their clai$s with the A9&"O Clai$s Co$$ittee) received in settle$ent shares of stoc4 valued at 1(). without protest or reservation. The private respondent has not been paid a sin#le centavo on its clai$) which was 4ept pendin# for $ore than seven years for alle#ed lac4 of supportin# papers. ,i#ni%cantly) the validity of that clai$ was not 6uestioned by the petitioner when it sou#ht to restrain the e'tra3udicial foreclosureof the $ort#a#e by the private respondent. The petitioner li$ited itself to the ar#u$ent that the private respondent was estopped fro$ 6uestionin# the decree because of its earlier co$pliance with its provisions. 2. The Court is especially disturbed by ,ection ((-) of the decree) 6uoted above) e'tin#uishin# all $ort#a#es and other liens attachin# to the assets of A9&"O. "t also notes) the restriction in ,ubsection (ii) thereof that all Gunsecured obli#ations shall not bear interestG and in ,ubsection (iii) that Gall accrued interests) penalties or char#es as of date hereof pertainin# to the obli#ations) whether secured or unsecured) shall not be reco#ni5ed.G These provisions $ust be read with the >ill of &i#hts) where it is clearly provided in ,ection - that Gno person shall be deprived of life) liberty or property without due course of law nor shall any person be denied the e6ual protection of the lawG and in ,ection - that Gno law i$pairin# the obli#ation of contracts shall be passed. 1etitioners ar#ue that property ri#hts) li4e all ri#hts) are sub3ect to re#ulation under the policepower for the pro$otion of the co$$on welfare. 0ence 3usti%cation of the provision. Court; The police power is not a panacea for all constitutional $aladies. Neither does its $ere invocation con3ure an instant and auto$atic 3usti%cation for every act of the #overn$ent deprivin# a person of his life) liberty or property. A le#islative act based on the police power re6uires the concurrence of a lawful sub3ect and a lawful $ethod. "n $ore fa$iliar words) a) the interests of the public #enerally) as distin#uished fro$ those of a particular class) should 3ustify the interference of the state= and b) the $eans e$ployed are reasonably necessary for the acco$plish$ent of the purpose and not unduly oppressive upon individuals The case is not applicable to these re6uire$ents because the interests of the public are not suFciently involved to warrant the interference of the #overn$ent with the private contracts of A9&"O. The decree spea4s va#uely of the Gpublic) particularly the s$all investors)G who would be pre3udiced if the corporation were not to be assisted. There was no record of these investors. Also) there was no public interest to be protected. The decree was to the bene%t of an e'clusive set of investors. The oppressiveness is patent on the face of the decree to rehabilitate A#ri'. No consideration is paid for the e'tinction of the $ort#a#e ri#hts. The accrued interests and other char#es are si$ply re3ected by the decree. A $ort#a#e lien is a property ri#ht derived fro$ contract and so co$es under the protection of the >ill of &i#hts. 1rivate property cannot si$ply be ta4en by law fro$ one person and #iven to another without co$pensation and any 4nown public purpose. This is plain arbitrariness and is not per$itted under the Constitution. And not only is there arbitrary ta4in#) there is discri$ination as well. "n e'tin#uishin# the $ort#a#eand other liens) the decree lu$ps the secured creditors with the unsecured creditors and places the$ on the sa$e level in the prosecution of their respective clai$s. Lnder the e6ual protection clause) all persons or thin#s si$ilarly situated $ust be treated ali4e) both in the privile#es conferred and the obli#ations i$posed. Conversely) all persons or thin#s di2erently situated should be treated di2erently. "n the case at bar) persons di2erently situated are si$ilarly treated) in disre#ard of the principle that there should be e6uality only a$on# e6uals. Ene $ay also well wonder why A9&"O was sin#led out for #overn$ent help) a$on# other corporations where the stoc4holders or investors were also swindled. "t is not clear why other co$panies entitled to si$ilar concern were not si$ilarly treated. En top of all this) New A#ri') "nc. was created by special decree notwithstandin# the provision of Article O"B) ,ection ( of the -+7< Constitution) then in force) that: ,CC. (. The >atasan# 1a$bansa shall not) e'cept by #eneral law) provide for the for$ation) or#ani5ation) or re#ulation of private corporations) unless such corporations are owned or controlled by the 9overn$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/ent 3it1out justi75ation. .hile it is true that the police power is superior to the i$pair$ent clause) the principle will apply only where the contract is so related to the public welfare that it will be considered con#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 by A9&"O are purely private transactions and have not been shown to be a2ected with public interest. CEASE AS CA Case Brief FACT,: Forrest Cease and %ve (!) other A$erican citi5ens for$ed Tiaon# 8illin# and 1lantation Co$pany. Cventually) the shares of the other ori#inal incorporators were bou#ht out by Cease with his children. The co$pany?s charter lapsed in Dune -+!*. Forrest Cease died in Au#ust -+!+. There was no $ention whether there were steps to li6uidate the co$pany. ,o$e of his children wanted an actual division while others wanted a reincorporation. Two of his children) >en3a$in and Florence) initiated ,pecial 1roceedin# No. <*+< with CF" Tayabas as4in# that the Tiaon# 8illin# and 1lantation Corporation be declared identical to Forrest Cease and that its properties be divided a$on# his children as intestate heirs. Hefendants opposed the sa$e but the CF" ruled in favor of the plainti2s. Hefendants %led a notice of appeal fro$ the CF"?s decision but the sa$e was dis$issed for bein# pre$ature. The case was elevated to the ,C which re$anded it to the Court of Appeals. The CA dis$issed the petition. ",,LC: .hether or not the Court of Appeals erred in aFr$in# the lower court?s decision that the sub3ect properties owned by the corporation are also properties of the estate of Forrest Cease 0C:H: NE. The trial court indeed found stron# support) one that is based on a well;entrenched principle of law which is the theory of G$er#er of Forrest :. Cease and The Tiaon# 8illin# as one personalityG) or that Gthe co$pany is only the business conduit and alter e#o of the deceased Forrest :. Cease and the re#istered properties of Tiaon# 8illin# are actually properties of Forrest :. Cease and should be divided e6ually) share and share ali4e a$on# his si' children) ... G) the trial court aptly applied the fa$iliar e'ception to the #eneral rule by disre#ardin# the le#al %ction of distinct and separate corporate personality and re#ardin# the corporation and the individual $e$ber one and the sa$e. "n shreddin# the %ctitious corporate veil) the trial 3ud#e narrated the undisputed factual pre$ise) thus: .hile the records showed that ori#inally its incorporators were aliens) friends or third;parties in relation to another) in the course of its e'istence) it developed into a close fa$ily corporation. The >oard of Hirectors and stoc4holders belon# to one fa$ily the head of which Forrest :. Cease always retained the $a3ority stoc4s and hence the control and $ana#e$ent of its a2airs. "t $ust be noted that as his children increase or beco$e of a#e) he continued distributin# his shares a$on# the$ addin# Florence) Teresa and 8arion until at the ti$e of his death only -+ were left to his na$e. He%nitely) only the $e$bers of his fa$ily bene%ted fro$ the Corporation. The corporation AneverA had any account with any ban4in# institution or if any account was carried in a ban4 on its behalf) it was in the na$e of 8r. Forrest :. Cease. There is truth in plainti2As alle#ation that the corporation is only a business conduit of his father and an e'tension of his personality) they are one and the sa$e thin#. Thus) the assets of the corporation are also the estate of Forrest :. Cease) the father of the parties herein who are all le#iti$ate children of full blood. A rich store of 3urisprudence has established the rule 4nown as the doctrine of disre#ardin# or piercin# the veil of corporate %ction. 9CNC&A: &L:C: a corporation is vested by law with a personality separate and distinct fro$ the persons co$posin# it as well as any other le#al entity to which it $ay be related. >y virtue of this attribute) a corporation $ay not) #enerally) be $ade to answer for acts or liabilities of its stoc4holders or those of the le#al entities to which it $ay be connected) and vice versa. This separate and distinct personality is) however) $erely a %ction created by law for convenience and to pro$ote the ends of 3ustice COCC1T"EN,: ,uch rule $ay not be used or invo4ed for ends subversive of the policy and purpose behind its creation or which could not have been intended by law to which it owes its bein#. This is particularly true where the %ction is used to defeat public convenience) 3ustify wron#) protect fraud) defend cri$e) confuse le#iti$ate le#al or 3udicial issues) perpetrate deception or otherwise circu$vent the law This is li4ewise true where the corporate entity is bein# used as an alter e#o) ad3unct) or business conduit for the sole bene%t of the stoc4holders or of another corporate. "n any of these cases) the notion of corporate entity will be pierced or disre#arded) and the corporation will be treated $erely as an association of persons or) where there are two corporations) they will be $er#ed as one) the one bein# $erely re#arded as part or the instru$entality of the other. An indubitable deduction fro$ the %ndin#s of the trial court cannot but lead to the conclusion that the business of the corporation is lar#ely) if not wholly) the personal venture of Forrest :. Cease. There is not even a shadow of a showin# that his children were subscribers or purchasers of the stoc4s they own. Their participation as no$inal shareholders e$anated solely fro$ Forrest :. CeaseAs #ratuitous dole out of his own shares to the bene%t of his children and ulti$ately his fa$ily. "f the Court sustained the theory of petitioners that the trial court acted in e'cess of 3urisdiction or abuse of discretion a$ountin# to lac4 of 3urisdiction in decidin# the civil case as a case for partition) Tiaon# 8illin# and 1lantation Co$pany would have been able to e'tend its corporate e'istence beyond the period of its charter which lapsed in Dune) -+!* under the #uise and cover of F. :) Cease 1lantation Co$pany) "nc. as Trustee which would be a#ainst the law) and as Trustee shall have been able to use the assets and properties for the bene%t of the petitioners) to the #reat pre3udice and defraudation. of private respondents. 0ence) it beco$es necessary and i$perative to pierce that corporate veil. The 3ud#$ent appealed fro$ is AFF"&8CH. ran5is5o +otors Cor6oration vs. Court of A66eals J9& -*-2) 2! Dune -+++K ,econd Hivision) Tuisu$bin# (D): ( concur Facts: En 2< Danuary -+*!) Francisco 8otors Corp. %led a co$plaint a#ainst ,pouses 9re#orio and :ibrada 8anuel to recover 1<)(-2.7) representin# the balance of the 3eep body purchased by the 8anuels fro$ Francisco 8otors= an additional su$ of 12)(!(.* representin# the unpaid balance on the cost of repair of the vehicle= and 17). for cost of suit and attorneyAs fees. To the ori#inal balance on the price of 3eep body were added the costs of repair. "n their answer) the 8anuel spouses interposed a counterclai$ for unpaid le#al services by 9re#orio 8anuel in the a$ount of 1!) which was not paid by the incorporators) directors and oFcers of Francisco 8otors. The trial court decided the case on 27 Dune -+*!) in favor of Francisco 8otors in re#ard to its clai$ for $oney) but also allowed the counter;clai$ of the 8anuel spouses. >oth parties appealed. En -! April -++-) the Court of Appeals sustained the trial courtAs decision. 0ence) the present petition for review on certiorari. Issue: .hether the Francisco 8otors Corporation should be liable for the le#al services of 9re#orio 8anuel rendered in the intestate proceedin#s over >enita Trinidad?s estate (of the Francisco fa$ily). Held: >asic in corporation law is the principle that a corporation has a separate personality distinct fro$ its stoc4holders and fro$ other corporations to which it $ay be connected. 0owever) under the doctrine of piercin# the veil of corporate entity) the corporationAs separate 3uridical personality $ay be disre#arded) for e'a$ple) when the corporate identity is used to defeat public convenience) 3ustify wron#) protect fraud) or defend cri$e. Also) where the corporation is a $ere alter e#o or business conduit of a person) or where the corporation is so or#ani5ed and controlled and its a2airs are so conducted as to $a4e it $erely an instru$entality) a#ency) conduit or ad3unct of another corporation) then its distinct personality $ay be i#nored. "n these circu$stances) the courts will treat the corporation as a $ere a##rupation of persons and the liability will directly attach to the$. The le#al %ction of a separate corporate personality in those cited instances) for reasons of public policy and in the interest of 3ustice) will be 3usti%ably set aside. 0erein) however) #iven the facts and circu$stances of this case) the doctrine of piercin# the corporate veil has no relevant application. The rationale behind piercin# a corporationAs identity in a #iven case is to re$ove the barrier between the corporation fro$ the persons co$prisin# it to thwart the fraudulent and ille#al sche$es of those who use the corporate personality as a shield for underta4in# certain proscribed activities. "n the present case) instead of holdin# certain individuals or persons responsible for an alle#ed corporate act) the situation has been reversed. "t is the Francisco 8otors Corporation (F8C) as a corporation which is bein# ordered to answer for the personal liability of certain individual directors) oFcers and incorporators concerned. 0ence) the doctrine has been turned upside down because of its erroneous invocation. "n fact) the services of 9re#orio 8anuel were solicited as counsel for $e$bers of the Francisco fa$ily to represent the$ in the intestate proceedin#s over >enita TrinidadAs estate. These estate proceedin#s did not involve any business of F8C. 8anuelAs $ove to recover unpaid le#al fees throu#h a counterclai$ a#ainst F8C) to o2set the unpaid balance of the purchase and repair of a 3eep body could only result fro$ an obvious $isapprehension that F8CAs corporate assets could be used to answer for the liabilities of its individual directors) oFcers) and incorporators. ,uch result if per$itted could easily pre3udice the corporation) its own creditors) and even other stoc4holders= hence) clearly ine6uitous to F8C. Further$ore) considerin# the nature of the le#al services involved) whatever obli#ation said incorporators) directors and oFcers of the corporation had incurred) it was incurred in their personal capacity. .hen directors and oFcers of a corporation are unable to co$pensate a party for a personal obli#ation) it is far;fetched to alle#e that the corporation is perpetuatin# fraud or pro$otin# in3ustice) and be thereby held liable therefor by piercin# its corporate veil. .hile there are no hard and fast rules on disre#ardin# separate corporate identity) we $ust always be $indful of its function and purpose. A court should be careful in assessin# the $ilieu where the doctrine of piercin# the corporate veil $ay be applied. Etherwise an in3ustice) althou#h unintended) $ay result fro$ its erroneous application. The personality of the corporation and those of its incorporators) directors and oFcers in their personal capacities ou#ht to be 4ept separate in this case. The clai$ for le#al fees a#ainst the concerned individual incorporators) oFcers and directors could not be properly directed a#ainst the corporation without violatin# basic principles #overnin# corporations. 8oreover) every action U includin# a counterclai$ U $ust be prosecuted or defended in the na$e of the real party in interest. "t is plainly an error to lay the clai$ for le#al fees of private respondent 9re#orio 8anuel at the door of F8C rather than individual $e$bers of the Francisco fa$ily. CIR vs Norton an/ Harrison Co26an, Case Brief 1lainti2s %led a collection action a#ainst O Corporation. Lpon e'ecution of the courtAs decision) O Corporation was found to be without assets. Thereafter) plainti2s %led an action a#ainst its present and past stoc4holder S Corporation which owned substantially all of the stoc4s of O corporation. The two corporations have the sa$e board of directors and S Corporation %nanced the operations of O corporation. 8ay S Corporation be held liable for the debts of O Corporation/ .hy/ A: Ses) S Corporation $ay be held liable for the debts of O Corporation. The doctrine of piercin# the veil of corporation %ction applies 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 the for$er controls the policies of the latter. Added to this is the fact that 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 Case Brief J9& -(2(<!) < April 2<K ,econd Hivision) Tuisu$bin# (D): < concur Facts: The spouses Alfredo :ipat and Cstelita >ur#os :ipat) owned G>elaAs C'port Tradin#G (>CT)) a sin#le proprietorship with principal oFce at No. *-( Aurora >oulevard) Cubao) Tue5on City. >CT was en#a#ed in the $anufacture of #ar$ents for do$estic and forei#n consu$ption. The :ipats also owned the G8ystical FashionsG in the Lnited ,tates) which sells #oods i$ported fro$ the 1hilippines throu#h >CT. 8rs. :ipat desi#nated her dau#hter) Teresita >. :ipat) to $ana#e >CT in the 1hilippines while she was $ana#in# G8ystical FashionsG in the Lnited ,tates. "n order to facilitate the convenient operation of >CT) Cstelita :ipat e'ecuted on -( Hece$ber -+7*) a special power of attorney appointin# Teresita :ipat as her attorney;in;fact to obtain loans and other credit acco$$odations fro$ 1aci%c >an4in# Corporation (1aci%c >an4). ,he li4ewise authori5ed Teresita to e'ecute $ort#a#e contracts on properties owned or co;owned by her as security for the obli#ations to be e'tended by 1aci%c >an4 includin# any e'tension or renewal thereof. ,o$eti$e in April -+7+) Teresita) by virtue of the special power of attorney) was able to secure for and in behalf of her $other) 8rs. :ipat and >CT) a loan fro$ 1aci%c >an4 a$ountin# to 1!*<)*!(. to buy fabrics to be $anufactured by >CT and e'ported to G8ystical FashionsG in the Lnited ,tates. As security therefor) the :ipat spouses) as represented by Teresita) e'ecuted a &eal Cstate 8ort#a#e over their property located at No. *-( Aurora >lvd.) Cubao) Tue5on City. ,aid property was li4ewise $ade to secure other additional or new loans) etc. En ! ,epte$ber -+7+) >CT was incorporated into a fa$ily corporation na$ed >elaAs C'port Corporation (>CC) in order to facilitate the $ana#e$ent of the business. >CC was en#a#ed in the business of $anufacturin# and e'portation of all 4inds of #ar$ents of whatever 4ind and description and utili5ed the sa$e $achineries and e6uip$ent previously used by >CT. "ts incorporators and directors included the :ipat spouses who owned a co$bined < shares out of the (2 shares subscribed) Teresita :ipat who owned 2 shares) and other close relatives and friends of the :ipats. Cstelita :ipat was na$ed president of >CC) while Teresita beca$e the vice; president and #eneral $ana#er. Cventually) the loan was later restructured in the na$e of >CC and subse6uent loans were obtained by >CC with the correspondin# pro$issory notes duly e'ecuted by Teresita on behalf of the corporation. A letter of credit was also opened by 1aci%c >an4 in favor of A. E. Nnittin# 8anufacturin# Co.) "nc.) upon the re6uest of >CC after >CC e'ecuted the correspondin# trust receipt therefor. C'port bills were also e'ecuted in favor of 1aci%c >an4 for additional %nances. These transactions were all secured by the real estate $ort#a#e over the :ipatsA property. The pro$issory notes) e'port bills) and trust receipt eventually beca$e due and de$andable. Lnfortunately) >CC defaulted in its pay$ents. After receipt of 1aci%c >an4As de$and letters) Cstelita :ipat went to the oFce of the ban4As li6uidator and as4ed for additional ti$e to enable her to personally settle >CCAs obli#ations. The ban4 acceded to her re6uest but Cstelita failed to ful%ll her pro$ise. Conse6uently) the real estate $ort#a#e was foreclosed and after co$pliance with the re6uire$ents of the law the $ort#a#ed property was sold at public auction. En <- Danuary -+*+) a certi%cate of sale was issued to respondent Cu#enio H. Trinidad as the hi#hest bidder. En 2* Nove$ber -+*+) the spouses :ipat %led before the Tue5on City &TC a co$plaint for annul$ent of the real estate $ort#a#e) e'tra3udicial foreclosure and the certi%cate of sale issued over the property a#ainst 1aci%c >an4 and Cu#enio H. Trinidad. The co$plaint alle#ed) a$on# others) that the pro$issory notes) trust receipt) and e'port bills were all ultra vires acts of Teresita as they were e'ecuted without the re6uisite board resolution of the >oard of Hirectors of >CC. The :ipats also averred that assu$in# said acts were valid and bindin# on >CC) the sa$e were the corporationAs sole obli#ation) it havin# a personality distinct and separate fro$ spouses :ipat. "t was li4ewise pointed out that TeresitaAs authority to secure a loan fro$ 1aci%c >an4 was speci%cally li$ited to 8rs. :ipatAs sole use and bene%t and that the real estate $ort#a#e was e'ecuted to secure the :ipatsA and >CTAs 1!*<)*!(. loan only. "n their respective answers) 1aci%c >an4 and Trinidad alle#ed in co$$on that petitioners :ipat cannot evade pay$ents of the value of the pro$issory notes) trust receipt) and e'port bills with their property because they and the >CC are one and the sa$e) the latter bein# a fa$ily corporation. Trinidad further clai$ed that he was a buyer in #ood faith and for value and that the :ipat spouses are estopped fro$ denyin# >CCAs e'istence after holdin# the$selves out as a corporation. After trial on the $erits) the &TC dis$issed the co$plaint. The :ipats ti$ely appealed the &TC decision to the Court of Appeals in CA;9.&. CB (-!<7. ,aid appeal) however) was dis$issed by the appellate court for lac4 of $erit. The :ipats then $oved for reconsideration) but this was denied by the appellate court in its &esolution of 2< February 2. The :ipat spouses %led the petition for review on certiorari. Issue: .hether >CC and >CT are separate business entities) and thus the :ipt spouses can isolate the$selves behind the corporate personality of >CC. Held: .hen the corporation is the $ere alter e#o or business conduit of a person) the separate personality of the corporation $ay be disre#arded. This is co$$only referred to as the Ginstru$entality ruleG or the alter e#o doctrine) which the courts have applied in disre#ardin# the separate 3uridical personality of corporations. As held in one case) where one corporation is so or#ani5ed and controlled and its a2airs are conducted so that it is) in fact) a $ere instru$entality or ad3unct of the other) the %ction of the corporate entity of the Ainstru$entalityA $ay be disre#arded. The control necessary to invo4e the rule is not $a3ority or even co$plete stoc4 control but such do$ination of %nances) policies and practices that the controlled corporation has) so to spea4) no separate $ind) will or e'istence of its own) and is but a conduit for its principal. The evidence on record shows >CT and >CC are not separate business entities. (-) Cstelita and Alfredo :ipat are the owners and $a3ority shareholders of >CT and >CC) respectively= (2) both %r$s were $ana#ed by their dau#hter) Teresita= -+ (<) both %r$s were en#a#ed in the #ar$ent business) supplyin# products to G8ystical Fashion)G a L.,. %r$ established by Cstelita :ipat= (() both %r$s held oFce in the sa$e buildin# owned by the :ipats= (!) >CC is a fa$ily corporation with the :ipats as its $a3ority stoc4holders= (7) the business operations of the >CC were so $er#ed with those of 8rs. :ipat such that they were practically indistin#uishable= (7) the corporate funds were held by Cstelita :ipat and the corporation itself had no visible assets= (*) the board of directors of >CC was co$posed of the >ur#os and :ipat fa$ily $e$bers= (+) Cstelita had full control over the activities of and decided business $atters of the corporation= and that (-) Cstelita :ipat had bene%ted fro$ the loans secured fro$ 1aci%c >an4 to %nance her business abroad and fro$ the e'port bills secured by >CC for the account of G8ystical Fashion.G "t could not have been coincidental that >CT and >CC are so intertwined with each other in ter$s of ownership) business purpose) and $ana#e$ent. Apparently) >CT and >CC are one and the sa$e and the latter is a conduit of and $erely succeeded the for$er. The spousesA atte$pt to isolate the$selves fro$ and hide behind the corporate personality of >CC so as to evade their liabilities to 1aci%c >an4 is precisely what the classical doctrine of piercin# the veil of corporate entity see4s to prevent and re$edy. >CC is a $ere continuation and successor of >CT) and the :ipat spouses cannot evade their obli#ations in the $ort#a#e contract secured under the na$e of >CC on the prete't that it was si#ned for the bene%t and under the na$e of >CT. Albert vs. Universit, !ublis1in4 Co. <9.&. No. :; -+--*= Danuary <) -+7!) ACTS: 8ariano Albert entered into a contract with Lniversity 1ublishin# Co.) "nc. throu#h Dose 8. Arue#o) its 1resident) whereby Lniversity would pay plainti2 for the e'clusive ri#ht to publish his revised Co$$entaries on the &evised 1enal Code. The contract stipulated that failure to pay one install$ent would render the rest of the pay$ents due. .hen Lniversity failed to pay the second install$ent) Albert sued for collection and won. 0owever) upon e'ecution) it was found that Lniversity was not re#istered with the ,CC. Albert petitioned for a writ of e'ecution a#ainst Dose 8. Arue#o as the real defendant. Lniversity opposed) on the #round that Arue#o was not a party to the case. ISSUE: .EN Arue#o can be held personally liable to the plainti2. HELD: SC,. The ,upre$e Court found that Arue#o represented a non;e'istent entity and induced not only Albert but the court to believe in such representation. Arue#o) actin# as representative of such non;e'istent principal) was the real party to the contract sued upon) and thus assu$ed such privile#es and obli#ations and beca$e personally liable for the contract entered into or for other acts perfor$ed as such a#ent. Ene who has induced another to act upon his wilful $isrepresentation that a corporation was duly or#ani5ed and e'istin# under the law) cannot thereafter set up a#ainst his 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 since it was Arue#o who had induced hi$ to act upon his (Arue#oAs) willful representation that Lniversity had been duly or#ani5ed and was e'istin# under the law. ABS%CBN vs CA Case Brief <$.R. No. &'=.)?# Banuar, '&# &)))C ACTS: "n -++) A>,;C>N and Biva e'ecuted a Fil$ C'hibition A#ree$ent whereby A>,;C>N was #iven the ri#ht of %rst refusal to the ne't twenty;four (2() Biva %l$s for TB telecast under such ter$s as $ay be a#reed upon by the parties hereto) provided) however) that such ri#ht shall be e'ercised by A>,;C>N fro$ the actual o2er in writin#. Conse6uently) Biva) throu#h defendant Hel &osario) o2ered A>,;C>N) throu#h its vice;president Charo ,antos;Concio) a list of three(<) %l$ pac4a#es (<7 titles) fro$ which A>,;C>N $ay e'ercise its ri#ht of %rst refusal under the afore;said a#ree$ent. A>, C>N re3ected said list. En February 27) -++2) Hel &osario approached 8s. Concio) with a list consistin# of !2 ori#inal $ovie titles) as well as -( re;runs fro$ which A>,;C>N $ay choose another !2 titles) or a total of -!7 titles) proposin# to sell to A>,;C>N airin# ri#hts over this pac4a#e of !2 ori#inals and !2 re;runs for 17)).. The pac4a#e was re3ected by A>,;C>N. En April 7) -++2) Hel &osario and 8r. 9raciano 9o5on of &>, discussed the ter$s and conditions of Biva?s o2er to sell the -( %l$s. En April 7) -++2) defendant Hel &osario received throu#h his secretary) a handwritten note fro$ 8s. Concio which reads: P0ere?s the draft of the contract. " hope you %nd everythin# in order)Q to which was attached a draft e'hibition a#ree$ent) a counter;proposal coverin# !< %l$s for a consideration of 1<! $illion. The said counter;proposal was however re3ected by Biva?s >oard of Hirectors. En April 2+) -++2) Biva #ranted &>, the e'clusive ri#ht to air -( Biva;produced andVor ac6uired %l$s includin# the fourteen (-() %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#ainst A>,;C>N) rulin# that there was no $eetin# of $inds on the price and ter$s of the o2er. Further$ore) the ri#ht of %rst refusal under the -++ Fil$ C'hibition A#ree$ent had previously been e'ercised per 8s. Concio?s letter to Hel &osario tic4in# o2 ten titles acceptable to the$) which would have $ade the -++2 a#ree$ent an entirely new contract. The Court of Appeals aFr$ed the decision of the &TC. 0ence) this petition. ISSUES -. .hether or not there was no perfected contract between petitioner and private respondent 2. .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. Contracts that are consensual in nature are perfected upon $ere $eetin# of the $inds. Ence there is concurrence between the o2er and the acceptance upon the sub3ect $atter) consideration) and ter$s of pay$ent a contract is produced. The o2er $ust be certain. To convert the o2er into a contract) the acceptance $ust be absolute and $ust not 6ualify the ter$s of the o2er= it $ust be plain) une6uivocal) unconditional) and without variance of any sort fro$ the proposal. A 6uali%ed acceptance) or one that involves a new proposal) constitutes a counter;o2er and is a re3ection of the ori#inal o2er. Conse6uently) when so$ethin# is desired which is not e'actly what is proposed in the o2er) such acceptance is not suFcient to #enerate consent because any $odi%cation or variation fro$ the ter$s of the o2er annuls the o2er. Cven if it be conceded ar#uendo that Hel &osario had accepted the counter;o2er) the acceptance did not bind B"BA) as there was no proof whatsoever that Hel &osario had the speci%c authority to do so. That Hel &osario did not have the authority to accept A>,;C>N?s counter;o2er was best evidenced by his sub$ission of the draft contract to B"BA?s >oard of Hirectors for the latter?s approval. "n any event) there was between Hel &osario and :ope5 """ no $eetin# of $inds. 2. Ses. A>,;C>N?s ri#ht of %rst refusal had already been e'ercised when 8s. Concio wrote to B"BA tic4in# o2 ten %l$s. As observed by the trial court) the subse6uent ne#otiation with A>,;C>N was for an entirely di2erent pac4a#e. 8s. Concio herself ad$itted on cross;e'a$ination to havin# used or e'ercised the ri#ht of %rst refusal. ,he stated that the list was not acceptable and was indeed not accepted by A>,;C>N. Hel &osario hi$self 4new and understood that A>,;C>N has lost its ri#hts of the %rst refusal when his list of <7 titles were re3ected. Coastal !a5i75 Tra/in4 vs Sout1ern Rollin4 +ills Case Brief ACTS: ,outhern &ollin# 8ills was rena$ed into Bisayan "nte#rated ,teel Corp (B",CE). En Hec. --) -+7-;B",CE obtained a loan fro$ H>1 a$ountin# to 1*<7). "t was secured by a &eal Cstate 8ort#a#e coverin# B",CEAs < parcels of land includin# the $achinery and e6uip$ents therein. ,econd :oan: B",CE entered a :oan A#ree$ent with respondent ban4s ( referred as GConsortiu$G) to %nance its i$portation for various raw $aterials. B",CE e'ecuted a second $ort#a#e over the previous properties $entioned) however they were unrecorded B",CE was unable to pay its second $ort#a#e with the consortiu$) which resulted in the latter ac6uirin# +@ of the e6uity of B",CE #ivin# the Consortiu$ the control and $ana#e$ent of B",CE. Hespite the ac6uisition) B",CE still re$ained indebted to the Consortiu$. Transaction to Coastal: >etween -+7( to -+7!) B",CE entered a processin# a#ree$ent with Coastal wherein Coastal delivered <) $etric tons of hot rolled steel coils which B",CE would process into bloc4 iron sheets. 0owever) B",CE was only able to return -)7 $etric tons of those sheets. En the loan to H>1: To pay its %rst $ort#a#e with H>1) B",CE sold 2 of its #enerators to F":8A9 1hils) "nc. H>1 e'ecuted a Heed of Assi#n$ent of the $ort#a#e in favor of the consortiu$. The Consortiu$ foreclosed the $ort#a#e and was the hi#hest bidder in an auction sale of B",CEAs properties. The Consortiu$ later sold the properties in favor of National ,teel Corporation. Coastal %les a civil action for Annul$ent or &escission of ,ale) Ha$a#es with 1reli$inary "n3unction. Coastal i$putes bad faith on the action of the Consortiu$) the latter bein# able to sell the properties of B",CE despite the attach$ent of the properties) placin# the$ beyond the reach of B",CEAs other creditors. The lower court ruled in favor of B",CE) declarin# the sale valid and le#al. The CA aFr$ed this. ISSUE -: .hether the consortiu$ disposed B",CEAs assets in fraud of creditors/ HELD: Ses. .hat the consortiu$ did was to pay to the$ the proceeds fro$ the sale of the #enerator sets which in turn they used to pay H>1. Hue to the Heed of Assi#n$ent issued by H>1) the respondent ban4s recovered what they re$itted to H>1 I it allowed the Consortiu$ to ac6uire H>1As pri$ary lien on the $ort#a#ed properties. Allowin# the$ as unsecured creditors ( as the $ort#a#e was unrecorded) to foreclose on the 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#es because) not bein# a natural person) it cannot e'perience physical su2erin# or senti$ents li4e wounded feelin#s) serious an'iety) $ental an#uish and $oral shoc4. The only e'ception to this rule is when the corporation has a #ood reputation that is debased) resultin# in its hu$iliation in the business real$. "n the present case) the records do not show any evidence that the na$e or reputation of petitioner has been sullied as a result of the Consortiu$As fraudulent acts. Accordin#ly) $oral da$a#es are not warranted. 1etitioner was able to recover e'e$plary da$a#es. Bar/ine Davies vs. Court of A66eals J9& -2*77) -+ Dune 2K) also $ureoods Corporation "s# Court o Appeals [() 1*+,-.' ,econd Hivision) >ellosillo (D): ( concur Facts: "n -++2) at the hei#ht of the power crisis which the country was then e'periencin#) and to re$edy and curtail further losses due to the series of power failures) 1ure Foods Corporation decided to install two (2) -! N. #enerators in its food processin# plant in ,an &o6ue) 8ari4ina City. ,o$eti$e in Nove$ber -++2 a biddin# for the supply and installation of the #enerators was held. ,everal suppliers and dealers were invited to attend a pre;biddin# conference to discuss the conditions) propose sche$e and speci%cations that would best suit the needs of 1L&CFEEH,. Eut of the * prospective bidders who attended the pre;biddin# conference) only < bidders) na$ely) Far Cast 8ills ,upply Corporation (FC8,CE)) 8onar4 and Advance 1ower sub$itted bid proposals and #ave bid bonds e6uivalent to !@ of their respective bids) as re6uired. Thereafter) in a letter dated -2 Hece$ber -++2 addressed to FC8,CE 1resident Alfonso 1o) 1L&CFEEH, con%r$ed the award of the contract to FC8,CE. "$$ediately) FC8,CE sub$itted the re6uired perfor$ance bond in the a$ount of 1-)*(-)-*7.+ and contractorAs all;ris4 insurance policy in the a$ount of 17)-<7)2+<. which 1L&CFEEH, throu#h its Bice 1resident >enedicto 9. Tope ac4nowled#ed in a letter dated -* Hece$ber -++2. FC8,CE also $ade arran#e$ents with its principal and started the 1L&CFEEH, pro3ect by purchasin# the necessary $aterials. 1L&CFEEH, on the other hand returned FC8,CEAs >idderAs >ond in the a$ount of 1-)).) as re6uested. :ater) however) in a letter dated 22 Hece$ber -++2) 1L&CFEEH, throu#h its ,enior Bice 1resident Teodoro :. Hi$ayu#a unilaterally cancelled the award as Gsi#ni%cant factors were uncovered and brou#ht to (their) attention which dictate (the) cancellation and warrant a total review and re;bid of (the) pro3ect.G Conse6uently) FC8,CE protested the cancellation of the award and sou#ht a $eetin# with 1L&CFEEH,. 0owever) on 27 8arch -++<) before the $atter could be resolved) 1L&CFEEH, already awarded the pro3ect and entered into a contract with DA&H"NC NC::) a division of Dardine Havies) "nc. (DA&H"NC)) which incidentally was not one of the bidders. FC8,CE thus wrote 1L&CFEEH, to honor its contract with the for$er) and to DA&H"NC to cease and desist fro$ deliverin# and installin# the 2 #enerators at 1L&CFEEH,. "ts de$and letters unheeded) FC8,CE sued both 1L&CFEEH, and DA&H"NC: 1L&CFEEH, for rene#in# on its contract) and DA&H"NC for its unwarranted interference and induce$ent. Trial ensued. After FC8,CE presented its evidence) DA&H"NC %led a He$urrer to Cvidence. En 27 Dune -++( the &e#ional Trial Court of 1asi#) >ranch 7*) #ranted DA&H"NCAs He$urrer to Cvidence. En 2* Duly -++( the trial court rendered a decision orderin# 1L&CFEEH,: (a) to inde$nify FC8,CE the su$ of 12)<). representin# the value of en#ineerin# services it rendered= (b) to pay FC8,CE the su$ of L,W-(). or its peso e6uivalent) and 1+). representin# contractorAs $ar4;up on installation wor4) considerin# that it would be i$possible to co$pel 1L&CFEEH, to honor) perfor$ and ful%ll its contractual obli#ations in view of 1L&CFEEHAs contract with DA&H"NC and notin# that construction had already started thereon= (c) to pay attorneyAs fees in an a$ount e6uivalent to 2@ of the total a$ount due= and) (d) to pay the costs. The trial court dis$issed the counterclai$ %led by 1L&CFEEH, for lac4 of factual and le#al basis. >oth FC8,CE and 1L&CFEEH, appealed to the Court of Appeals. FC8,CE appealed the 27 Dune -++( &esolution of the trial court which #ranted the He$urrer to Cvidence %led by DA&H"NC resultin# in the dis$issal of the co$plaint a#ainst it) while 1L&CFEEH, appealed the 2* Duly -++( Hecision of the sa$e court which ordered it to pay FC8,CE. En -( Au#ust -++7 the Court of Appeals aFr$ed in toto the 2* Duly -++( Hecision of the trial court. "t also reversed the 27 Dune -++( &esolution of the lower court and ordered DA&H"NC to pay FC8,CE da$a#es for inducin# 1L&CFEEH, to violate the latterAs contract with FC8,CE. As such) DA&H"NC was ordered to pay FC8,CE 12)). for $oral da$a#es. "n addition) 1L&CFEEH, was also directed to pay FC8,CE 12)). as $oral da$a#es and 1-)). as e'e$plary da$a#es as well as 2@ of the total a$ount due as attorneyAs fees. En <- Danuary -++7 the Court of Appeals denied for lac4 of $erit the separate $otions for reconsideration %led by 1L&CFEEH, and DA&H"NC. 0ence) 2 petitions for review %led were by 1L&CFEEH, and DA&H"NC which were subse6uently consolidated. Issue: .hether FC8,CE is entitled to an award for $oral da$a#es. Held: >y the unilateral cancellation of the contract) 1L&C FEEH, has acted with bad faith and this was further a##ravated by the subse6uent in4in# of a contract between 1urefoods and Dardine. "t is very evident that 1urefoods thou#ht that by the e'pedient $eans of $erely writin# a letter would auto$atically cancel or nullify the e'istin# contract entered into by both parties after a process of biddin#. This is a Ma#rant violation of the e'press provisions of the law and is contrary to fair and 3ust dealin#s to which every $an is due. The Court has awarded in the past $oral da$a#es to a corporation whose reputation has been bes$irched. 0erein) FC8,CE has suFciently shown that its reputation was tarnished after it i$$ediately ordered e6uip$ent fro$ its suppliers on account of the ur#ency of the pro3ect) only to be canceled later. The Court thus sustain the appellate courtAs award of $oral da$a#es. The Court however reduced the award fro$ 12)). to 1-)).) as $oral da$a#es are never intended to enrich the recipient. :i4ewise) the award of e'e$plary da$a#es by way of e'a$ple for the public #ood is e'cessive and should be reduced to 1-).. En the other hand) the appellate court erred in orderin# DA&H"NC to pay $oral da$a#es to FC8,CE as it supposedly induced 1L&CFEEH, to violate the contract with FC8,CE. .hile it $ay see$ that 1L&CFEEH, and DA&H"NC connived to deceive FC8,CE) there is no speci%c evidence on record to support such perception. :i4ewise) there is no showin# whatsoever that DA&H"NC induced 1L&CFEEH,. The si$ilarity in the desi#n sub$itted to 1L&CFEEH, by both DA&H"NC and FC8,CE) and the tender of a lower 6uotation by DA&H"NC are insuFcient to show that DA&H"NC indeed induced 1L&CFEEH, to violate its contract with FC8,CE. ili6inas Broa/5astin4 Net3or9 In5. vs. A4o +e/i5al an/ E/u5ational Center%Bi5ol C1ristian Colle4e of +e/i5ine <A+EC%BCC+C J9& -(-++() -7 Danuary 2!K Facts: PC'posXQ is a radio docu$entary pro#ra$ hosted by Car$elo Y8el? &i$a (P&i$aQ) and 0er$o#enes YDun? Ale#re (PAle#reQ). C'posX is aired every $ornin# over HZ&C;A8 which is owned by Filipinas >roadcastin# Networ4) "nc. (PF>N"Q). PC'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#ed co$plaints fro$ students) teachers and parents a#ainst A#o 8edical and Cducational Center;>icol Christian Colle#e of 8edicine (PA8CCQ) and its ad$inistrators. Clai$in# that the broadcasts were defa$atory) A8CC and An#elita A#o (PA#oQ)) as Hean of A8CC?s Colle#e of 8edicine) %led a co$plaint for da$a#es a#ainst F>N") &i$a and Ale#re on 27 February -++. The co$plaint further alle#ed that A8CC is a reputable learnin# institution. .ith the supposed e'posXs) F>N") &i$a and Ale#re Ptrans$itted $alicious i$putations) and as such) destroyed plainti2s? (A8CC and A#o) reputation.Q A8CC and A#o included F>N" as defendant for alle#edly failin# to e'ercise due dili#ence in the selection and supervision of its e$ployees) particularly &i$a and Ale#re. En -* Dune -++) F>N") &i$a and Ale#re) throu#h Atty. &o5il :o5ares) %led an Answer alle#in# that the broadcasts a#ainst A8CC were fair and true. F>N") &i$a and Ale#re clai$ed that they were plainly i$pelled by a sense of public duty to report the P#oin#s;on in A8CC) Jwhich isK an institution i$bued with public interest.Q Thereafter) trial ensued. Hurin# the presentation of the evidence for the defense) Atty. Cd$undo Cea) collaboratin# counsel of Atty. :o5ares) %led a 8otion to His$iss on F>N"?s behalf. The trial court denied the $otion to dis$iss. Conse6uently) F>N" %led a separate Answer clai$in# that it e'ercised due dili#ence in the selection and supervision of &i$a and Ale#re. F>N" clai$ed that before hirin# a broadcaster) the broadcaster should (-) %le an application= (2) be interviewed= and (<) under#o an apprenticeship and trainin# pro#ra$ after passin# the interview. F>N" li4ewise clai$ed that it always re$inds its broadcasters to Pobserve truth) fairness and ob3ectivity in their broadcasts and to refrain fro$ usin# libelous and indecent lan#ua#e.Q 8oreover) F>N" re6uires all broadcasters to pass the Napisanan n# $#a >rod4aster sa 1ilipinas (PN>1Q) accreditation test and to secure a N>1 per$it. En -( Hece$ber -++2) the trial court rendered a Hecision %ndin# F>N" and Ale#re liable for libel e'cept &i$a. The trial court held that the broadcasts are libelous 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 even verify their reports before airin# the$ to show #ood faith. "n holdin# F>N" liable for libel) the trial court found that F>N" failed to e'ercise dili#ence in the selection and supervision of its e$ployees. "n absolvin# &i$a fro$ the char#e) the trial court ruled that &i$a?s only participation was when he a#reed with Ale#re?s e'posX. The trial court found &i$a?s state$ent within the Pbounds of freedo$ of speech) e'pression) and of the press.Q >oth parties) na$ely) F>N") &i$a and Ale#re) on one hand) and A8CC and A#o) on the other) appealed the decision to the Court of Appeals. The Court of Appeals aFr$ed the trial court?s 3ud#$ent with $odi%cation. The appellate court $ade &i$a solidarily liable with F>N" and Ale#re. The appellate court denied A#o?s clai$ for da$a#es and attorney?s fees because the broadcasts were directed a#ainst A8CC) and not a#ainst her. F>N") &i$a and Ale#re %led a $otion for reconsideration which the Court of Appeals denied in its 27 Danuary 2 &esolution. 0ence) F>N" %led the petition for review. Issue: .hether A8CC is entitled to $oral da$a#es. Held: A 3uridical person is #enerally not entitled to $oral da$a#es because) unli4e a natural person) it cannot e'perience physical su2erin# or such senti$ents as wounded feelin#s) serious an'iety) $ental an#uish or $oral shoc4. The Court of Appeals cites 8a$bulao :u$ber Co. v. 1N>) et al. to 3ustify the award of $oral da$a#es. 0owever) the Court?s state$ent in 8a$bulao that Pa corporation $ay have a #ood reputation which) if bes$irched) $ay also be a #round for the award of $oral da$a#esQ is an obiter dictu$. Nevertheless) A8CC?s clai$ for $oral da$a#es falls under ite$ 7 of Article 22-+ of the Civil Code. This provision e'pressly authori5es the recovery of $oral da$a#es in cases of libel) slander or any other for$ of defa$ation. Article 22-+(7) does not 6ualify whether the plainti2 is a natural or 3uridical person. Therefore) a 3uridical person such as a corporation can validly co$plain for libel or any other for$ of defa$ation and clai$ for $oral da$a#es. 8oreover) where the broadcast is libelous per se) the law i$plies da$a#es. "n such a case) evidence of an honest $ista4e or the want of character or reputation of the party libeled #oes only in $iti#ation of da$a#es. Neither in such a case is the plainti2 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 per se. Thus) A8CC is entitled to $oral da$a#es. 0owever) the Court found the award of 1<) $oral da$a#es unreasonable. The record shows that even thou#h the broadcasts were libelous per se) A8CC has not su2ered any substantial or $aterial da$a#e to its reputation. Therefore) the Court reduced the award of $oral da$a#es fro$ 1<) to 1-!). Cor6orate La3 Case Di4est: !NB A. CA <&)(=C Case Brief 9.&. No. :;27-!! 8ay -*) -+7* :essons Applicable: :iability for Torts (Corporate :aw) ACTS: 1N> e'ecuted its bond wV &ita 9ueco Tapnio as principal) in favor of the 1N> to #uarantee the pay$ent of TapnioAs 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)<7+.+- 1N> de$anded both oral and written but to no avail Tapnio $ort#a#ed to the ban4 her lease a#ree$ent wV Dacobo Tua5on for her unused e'port su#ar 6uota at 12.* per picular or a total of 12)* which was $ore than the value of the bond 1N> insisted on raisin# it to 1<. per picular so Tua5on re3ected the o2er ISSUE: .VN 1N> should be liable for tort HELD: SC,. aFr$ed. .hile Tapnio had the ulti$ate authority of approvin# or disapprovin# the proposed lease since the 6uota was $ort#a#ed to the ban4) it certainly CANNET escape its responsibility of observin#) for the protection of the interest of Tapnio and Tua5on) that the de#ree of care) precaution and vi#ilance which the circu$stances 3ustly de$and in approvin# or disapprovin# the lease of said su#ar 6uota Art. 2- of the Civil Code: any person who wilfully causes loss or in3ury to another in a $anner that is contrary to $orals) #ood custo$s or public policy shall co$pensate the latter for the da$a#e. !rofessional Servi5es# In5 A. CA <'?&?C Case Brief <9.&. No. -272+7) February 2) 2-) :essons Applicable: :iability for Torts (Corporate :aw) ACTS: Cnri6ue A#ana told his wife Natividad A#ana to #o loo4 for their nei#hbor) Hr. A$pil) a sur#eon sta2 $e$ber of 8edical City) a pro$inent and 4nown hospital Natividad su2ered fro$ in3ury due to 2 #au#es left inside her body so they sued 1rofessional "nc. (1,") Hespite) the report of 2 $issin# #au5es after the operation 1," did NET initiate an investi#ation ISSUE: .VN 1," should be liable for tort. HELD: SC,. -!8 [ -2@ int. until full satisfaction. .hile 1," had no power to control the $eansV$ethod by which Hr. A$pil conducted the sur#ery on Natividad) they had the power to review or cause the review 1," had the duty to tread on as captain of the ship for the purpose of ensuin# the safety of the patients availin# the$selves of its services and facilities 1," de%ned its standards of corporate conduct: -. Cven after her operation to ensure her safety as a patient 2. NET li$ited to record the 2 $issin# #au5es <. C'tended to deter$inin# Hr. A$pils role in it) brin#in# the $atter to his attention and correctin# his ne#li#ence Ad$ission bars itself fro$ ar#uin# that its corp. resp. is NET yet in e'istence at the ti$e Natividad underwent treat$ent Hr. A$pil ; $edial ne#li#ence 1," ; Corporate Ne#li#ence NETC: :iability uni6ue to this case because of i$plied a#ency and ad$itted corporate duty 27 years already and Hr. A$pilAs status could no lon#er be ascertained DUDAN INTERNATI"NAL C"R!"RATI"N vs. REEES <$.R. No. &='(')# Se6te2ber ')# '?&?C ACTS: ,o$eti$e in 8arch -++*) Nu4an) "nc. conducted biddin# for the supply and installation of si#na#es in a buildin# bein# constructed in 8a4ati City. &o$eo 8orales tendered the winnin# bid and was awarded the 1h1 ! $illion contract. ,hort chan#ed) 8orales %led a Co$plaint with the &TC a#ainst Nu4an) "nc. for a su$ of $oney. The &TC rendered a Hecision in favor of 8orales and a#ainst Nu4an) "nc. After the decision beca$e %nal and e'ecutory) 8orales $oved for and secured a writ of e'ecution a#ainst Nu4an) "nc. The sheri2 then levied upon various personal properties of Nu4an "nternational Corporation (N"C). N"C then %led an AFdavit of Third;1arty Clai$. Notably) N"C was incorporated in Au#ust 2) or shortly after Nu4an) "nc. had stopped participatin# in Civil Case. "n reaction to the third party clai$) 8orales interposed an E$nibus 8otion dated April <) 2<. "n it) 8orales prayed) applyin# the principle of piercin# the veil of corporate %ction) that an order be issued for the satisfaction of the 3ud#$ent debt of Nu4an) "nc. with the properties under the na$e or in the possession of N"C) it bein# alle#ed that both corporations are but one and the sa$e entity. >y Erder of 8ay 2+) 2< as reiterated in a subse6uent order) the court denied the o$nibus $otion. "n a bid to establish the lin4 between N"C and Nu4an) "nc.) and thus deter$ine the true relationship between the two) 8orales %led a 8otion for C'a$ination of Dud#$ent Hebtors dated 8ay () 2!. "n this $otion 8orales sou#ht that subpoena be issued a#ainst the pri$ary stoc4holders of Nu4an) "nc.) a$on# the$ 8ichael Chan) a.4.a. Chan Nai Nit. This too was denied by the trial court in an Erder dated 8ay 2() 2!. 8orales then sou#ht the inhibition of the presidin# 3ud#e) Cduardo >. 1eralta) Dr.) who eventually #ranted the $otion. The case was re;ra\ed to >ranch 2-) presided by public respondent Dud#e A$or &eyes. >efore the 8anila &TC) >ranch 2-) 8orales %led a 8otion to 1ierce the Beil of Corporate Fiction to declare N"C as havin# no e'istence separate fro$ Nu4an) "nc. This ti$e around) the &TC) by Erder dated 8arch -2) 27) #ranted the $otion. N"C $oved but was denied reconsideration in another Erder dated Dune 7) 27. En petition for certiorari before CA) the sa$e was denied. The CA later denied N"C?s $otion for reconsideration in the assailed resolution. 0ence) the instant petition for review. ISSUE: .hether the trial and appellate courts correctly applied) under the pre$ises) the principle of piercin# the veil of corporate %ction. RULIN$: 1iercin# the veil of corporate entity apllies only: (-) the court $ust %rst ac6uire 3urisdiction over the corporation or corporations involved before its or their separate personalities are disre#arded= and (2) the doctrine of piercin# the veil of corporate entity can only be raised durin# a full;blown trial over a cause of action duly co$$enced involvin# parties duly brou#ht under the authority of the court by way of service of su$$ons or what passes as such service. 8ere ownership by a sin#le stoc4holder or by another corporation of a substantial bloc4 of shares of a corporation does not) standin# alone) provide suFcient 3usti%cation for disre#ardin# the separate corporate personality. For this #round to hold sway in this case) there $ust be proof that Chan had control or co$plete do$inion of Nu4an and N"C?s %nances) policies) and business practices= he used such control to co$$it fraud= and the control was the pro'i$ate cause of the %nancial loss co$plained of by 8orales. The absence of any of the ele$ents prevents the piercin# of the corporate veil. And indeed) the records do not show the presence of these ele$ents. "n %ne) there is no showin# that the incorporation) and the separate and distinct personality) of N"C was used to defeat 8orales? ri#ht to recover fro$ Nu4an) "nc. Dud#in# fro$ the records) no serious atte$pt was $ade to levy on the properties of Nu4an) "nc. 8orales could not) thus) validly ar#ue that Nu4an) "nc. tried to avoid liability or had no property a#ainst which to proceed. The su##estion that N"C is but a continuation and successor of Nu4an) "nc.) owned and controlled as they are by the sa$e stoc4holders) stands without factual basis. "t is true that 8ichael Chan) a.4.a. Chan Nai Nit) owns (@ of the outstandin# capital stoc4 of both corporations. >ut such circu$stance) standin# alone) is insuFcient to establish identity. There $ust be at least a substantial identity of stoc4holders for both corporations in order to consider this factor to be constitutive of corporate identity. Cvidently) the afore$entioned case relied upon by 8orales cannot 3ustify the application of the principle of piercin# the veil of corporate %ction to the instant case. As shown by the records) the na$e 8ichael Chan) the si$ilarity of business activities en#a#ed in) and incidentally the word GNu4anG appearin# in the corporate na$es provide the ne'us between Nu4an) "nc. and N"C. As illustrated) these circu$stances are insuFcient to establish the identity of N"C as the alter e#o or successor of Nu4an) "nc. Ba9a Invest2ents Cor6 vs CIR Case Brief a5ts: in -++() petitioner sou#ht to invest in DANA C6uities Corporation (DCC)) which was then plannin# to underta4e an initial public o2erin# ("1E) and listin# of its shares of stoc4 with the 1hilippine ,toc4 C'chan#e. petitioner proposed to subscribe to Five 0undred Ci#ht 8illion Ci#ht 0undred ,i' Thousand Two 0undred 1esos (1!*)*7)2.) out of the increase in the authori5ed capital stoc4 of DCC throu#h a ta';free e'chan#e under ,ection <((c)(2) of the National "nternal &evenue Code (N"&C) of -+77) as a$ended) which was e2ected by the e'ecution of a ,ubscription A#ree$ent and Heed of Assi#n$ent of 1roperty in 1ay$ent of ,ubscription. Lnder this A#ree$ent) as pay$ent for its subscription) petitioner will assi#n and transfer to DCC shares of stoc4. The intended "1E and listin# of shares of DCC did not $ateriali5e. 0owever) DCC still decided to proceed with the increase in its authori5ed capital stoc4 and petitioner a#reed to subscribe thereto) but under di2erent ter$s of pay$ent. Thus) petitioner and DCC e'ecuted the A$ended ,ubscription A#ree$ent wherein the above;enu$erated &90C) 19C") and LC1> shares of stoc4 were transferred to DCC. "n lieu of the FC>TC shares) petitioner paid DCC. petitioner paid Ene basic docu$entary sta$p ta' inclusive of the 2!@ surchar#e for late pay$ent on the A$ended ,ubscription A#ree$ent. 1etitioner) after seein# the &HE?s certi%cations) the total a$ount of which was less than the actual a$ount it had paid as docu$entary sta$p ta') concluded that it had overpaid. 1etitioner subse6uently sou#ht a refund for the alle#ed e'cess docu$entary sta$p ta' and surchar#es it had paid. 1etitioner?s $ain contention in this clai$ for refund is that the ta' base for the docu$entary sta$p ta' on the A$ended ,ubscription A#ree$ent should have been only the shares of stoc4 in &90C) 19C") and LC1> that petitioner had transferred to DCC as pay$ent for its subscription to the DCC shares) and should not have included the cash portion of its pay$ent) based on ,ection -77 of the National "nternal &evenue Code of -+77) as a$ended by &epublic Act No. 777) or the New Hocu$entary ,ta$ps Ta' :aw (the -++( Ta' Code)) the law applicable at the ti$e of the transaction. 1etitioner ar#ues that the cash co$ponent of its pay$ent for its subscription to the DCC shares) totalin# Three 0undred ,eventy 8illion ,even 0undred ,i'ty;,i' Thousand 1esos (1<7)777).) should not have been char#ed any docu$entary sta$p ta'. 1etitioner clai$s that there was overpay$ent because the ta' due on the transferred shares was only Five 0undred Ninety;Three Thousand Five 0undred Twenty; Ci#ht and -!V- 1esos (1!+<)!2*.-!)) as indicated in the certi%cations issued by &HE Cs6uivias. 1etitioner alle#es that it is entitled to a refund for the overpay$ent) which is the di2erence in the a$ount it had actually paid (1-)<)*+!.7!) and the a$ount of docu$entary sta$p ta' due on the transfer of said shares (1!+<)!2*.-!)) or a total of Four 0undred Ten Thousand Three 0undred ,i'ty;,even 1esos (1(-)<77.). 1etitioner e'plains that in this instance where shares of stoc4 are used as subscription pay$ent) there are two docu$entary sta$p ta' incidences) na$ely) the docu$entary sta$p ta' on the ori#inal issuance of the shares subscribed (the DCC shares)) which is i$posed under ,ection -7!= and the docu$entary sta$p ta' on the shares transferred in pay$ent of such subscription (the transfer of the &90C) 19C" and LC1> shares of stoc4 fro$ petitioner to DCC)) which is i$posed under ,ection -77 of the -++( Ta' Code. 1etitioner ar#ues that the docu$entary sta$p ta' i$posed under ,ection -7! is due on ori#inal issuances of certi%cates of stoc4 and is co$puted based on the a##re#ate par value of the shares to be issued= and that these certi%cates of stoc4 are issued only upon full pay$ent of the subscription price such that under the >ureau of "nternal &evenue?s (>"&?s). &espondent $aintains that the docu$entary sta$p ta' i$posed in this case is on the ori#inal issue of certi%cates of stoc4 of DCC on the subscription by the petitioner of the 1!*)*7)2. shares out of the increase in the authori5ed capital stoc4 of the for$er pursuant to ,ection -7! of the N"&C. The docu$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$ent of the subscribed shares in DCC. &espondent avers that the a$ounts indicated in the Certi%cates of &HE Cs6uivias are the a$ounts of docu$entary sta$p ta' representin# the e6uivalent of each #roup of shares bein# applied for pay$ent. Considerin# that the a$ount of docu$entary sta$p ta' represented by the shares of stoc4 in the afore$entioned co$panies a$ounted only to 1!+<)!2*.-!) while the basic docu$entary sta$p ta' for the entire subscription of 1!*)*7)2. was co$puted by respondent?s revenue oFcers to the tune of 1*<)--7.72) e'clusive of the penalties) leavin# a balance of 12+)!**.!7) is a clear indication that the pay$ent $ade with the shares of stoc4 is insuFcient. ISSUE: whether or not petitioner is entitled to a partial refund of the docu$entary sta$p ta' and surchar#es it paid on the e'ecution of the A$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 thus incu$bent upon petitioner to show clearly its basis for clai$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 DANA "nvest$ents Corporation and DANA C6uities Corporation are established and enforceable at the ti$e the PA$ended ,ubscription A#ree$ent and Heed of Assi#n$ent of 1roperty in 1ay$ent of ,ubscriptionQ were si#ned by the parties and their witness) so is the ri#ht of the state to ta' the aforestated docu$ent evidencin# the transaction. H,T is a ta' on the docu$ent itself and therefore the rate of ta' $ust be deter$ined on the basis of what is written or indicated on the instru$ent itself independent of any ad3ust$ent which the parties $ay a#ree on in the future ' ' '. The H,T upon the ta'able docu$ent should be paid at the ti$e the contract is e'ecuted or at the ti$e the transaction is acco$plished. The overridin# purpose of the law is the collection of ta'es. ,o that when it paid in cash the a$ount of 1<7)777). in substitution for) or replace$ent of the -)<-<)-77 FC>TC shares) its pay$ent of 1-)<)*<!.7! docu$entary sta$ps ta' pursuant to ,ection -7! of N"&C is in order. Thus) applyin# the settled rule in this 3urisdiction that) a clai$ for refund is in the nature of a clai$ for e'e$ption) thus) should be construed in strictissi$i 3uris a#ainst the ta'payer (Co$$issioner of "nternal &evenue vs. To4yo ,hippin# Co.) :td.) 2(( ,C&A <<2) and since the petitioner failed to adduce evidence that will show that it is e'e$pt fro$ H,T under ,ection -++ or other provision of the ta' code) the court ruled the focal issue in the ne#ative. A docu$entary sta$p ta' is in the nature of an e'cise ta'. "t is not i$posed upon the business transacted but is an e'cise upon the privile#e) opportunity or facility o2ered at e'chan#es for the transaction of the business. "t is an e'cise upon the facilities used in the transaction of the business separate and apart fro$ the business itself. Hocu$entary sta$p ta'es are levied on the e'ercise by persons of certain privile#es conferred by law for the creation) revision) or ter$ination of speci%c le#al relationships throu#h the e'ecution of speci%c instru$ents. docu$entary sta$p ta'es are levied independently of the le#al status of the transactions #ivin# rise thereto. The docu$entary sta$p ta'es $ust be paid upon the issuance of the said instru$ents) without re#ard to whether the contracts which #ave rise to the$ are rescissible) void) voidable) or unenforceable. The fact that it was petitioner and not DCC that paid for the docu$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 the docu$entary sta$p ta' shall be paid by the person $a4in#) si#nin#) issuin#) acceptin# or transferrin# the property) ri#ht or obli#ation. petition is H",8",,CH. "n4 Eon4# et al. vs. Tiu# et al. <J9& -(((77) * April 2<K) Facts: "n -++() the construction of the 8asa#ana Citi$all in 1asay City was threatened with stoppa#e and inco$pletion when its owner) the First :andlin4 Asia Hevelop$ent Corporation (F:AHC)) which was owned by Havid ,. Tiu) Cely S. Tiu) 8oly Su 9ow) >elen ,ee Su) H. Terence S. Tiu) Dohn Su and :ourdes C. Tiu (the Tius)) encountered dire %nancial diFculties. "t was heavily indebted to the 1hilippine National >an4 (1N>) for 1-+ $illion. To stave o2 foreclosure of the $ort#a#e on the two lots where the $all was bein# 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 they entered into) the En#s and the Tius a#reed to $aintain e6ual shareholdin#s in F:AHC: the En#s were to subscribe to -)) shares at a par value of 1-. each while the Tius were to subscribe to an additional !(+)* shares at 1-. each in addition to their already e'istin# subscription of (!)2 shares. Further$ore) they a#reed that the Tius were entitled to no$inate the Bice;1resident and the Treasurer plus ! directors while the En#s were entitled to no$inate the 1resident) the ,ecretary and 7 directors (includin# the chair$an) to the board of directors of F:AHC. 8oreover) the En#s were #iven the ri#ht to $ana#e and operate the $all. Accordin#ly) the En#s paid 1- $illion in cash for their subscription to -)) shares of stoc4 while the Tius co$$itted to contribute to F:AHC a four;storey buildin# and two parcels of land respectively valued at 12 $illion (for 2) shares)) 1< $illion (for <) shares) and 1(+.* $illion (for (+)* shares) to cover their additional !(+)* stoc4 subscription therein. The En#s paid in another 17 $illion < to F:AHC and 12 $illion to the Tius over and above their 1- $illion invest$ent) the total su$ of which (1-+ $illion) was used to settle the 1-+ $illion $ort#a#e indebtedness of F:AHC to 1N>. The business har$ony between the En#s and the Tius in F:AHC) however) was shortlived because the Tius) on 2< February -++7) rescinded the 1re;,ubscription A#ree$ent. The Tius accused the En#s of (-) refusin# to credit to the$ the F:AHC shares coverin# their real property contributions= (2) preventin# Havid ,. Tiu and Cely S. Tiu fro$ assu$in# the positions of and perfor$in# their duties as Bice;1resident and Treasurer) respectively) and (<) refusin# to #ive the$ the oFce spaces a#reed upon. The controversy %nally ca$e to a head when the case was co$$enced by the Tius on 27 February -++7 at the ,ecurities and C'chan#e Co$$ission (,CC)) see4in# con%r$ation of their rescission of the 1re;,ubscription A#ree$ent. After hearin#) the ,CC) throu#h then 0earin# EFcer &olando 9. Andaya) Dr.) issued a decision on -+ 8ay -++7 con%r$in# the rescission sou#ht by the Tius. En $otion of both parties) the above decision was partially reconsidered but only insofar as the En#sA 17 $illion was declared not as a pre$iu$ on capital stoc4 but an advance (loan) by the En#s to F:AHC and that the i$position of interest on it was correct. >oth parties appealed to the ,CC en banc which rendered a decision on -- ,epte$ber -++*) aFr$in# the -+ 8ay -++7 decision of the 0earin# EFcer. The ,CC en banc con%r$ed the rescission of the 1re;,ubscription A#ree$ent but reverted to classifyin# the 17 $illion paid by the En#s as pre$iu$ on capital and not as a loan or advance to F:AHC) hence) not entitled to earn interest. En appeal) the Court of Appeals (CA) rendered a decision on ! Ectober -+++) $odifyin# the ,CC order of -- ,epte$ber -++*. Their $otions for reconsideration havin# been denied) both parties %led separate petitions for review before the ,upre$e Court. En - February 22) the ,upre$e Court pro$ul#ated its Hecision) aFr$in# the assailed decision of the Court of Appeals but with the $odi%cations that the 12 $illion loan e'tended by the En#s to the Tius shall earn interest at -2@ per annu$ to be co$puted fro$ the ti$e of 3udicial de$and which is fro$ 2< April -++7= that the 17 $illion advanced by the En#s to the F:AHC shall earn interest at -@ per annu$ to be co$puted fro$ the date of the F:AHC >oard &esolution which is -+ Dune -++7= and that the Tius shall be credited with (+)* shares in F:AHC for their property contribution) speci%cally) the -!- s6. $. parcel of land. The Court aFr$ed the fact that both the En#s and the Tius violated their respective obli#ations under the 1re;,ubscription A#ree$ent. En -! 8arch 22) the Tius %led before the Court a 8otion for "ssuance of a .rit of C'ecution. Aside fro$ their opposition to the TiusA 8otion for "ssuance of .rit of C'ecution) the En#s %led their own G8otion for &econsideration= Alternatively) 8otion for 8odi%cation (of the February -) 22 Hecision)G on -! 8arch 22. .illie En# %led a separate G8otion for 1artial &econsiderationG dated * 8arch 22) pointin# out that there was no violation of the 1re;,ubscription A#ree$ent on the part of the En#s) a$on# others. En 2+ Danuary 2<) the ,pecial ,econd Hivision of this Court held oral ar#u$ents on the respective positions of the parties. En 27 February 2<) Hr. .illie En# and the rest of the $ovants En# %led their respective $e$oranda. En 2* February 2<) the Tius sub$itted their $e$orandu$. Issue [1]: .hether the pre;,ubscription A#ree$ent e'ecuted by the En#s is actually a subscription contract. Held [1]: F:AHC was ori#inally incorporated with an authori5ed capital stoc4 of !) shares with the Tius ownin# (!)2 shares representin# the paid;up capital. .hen the Tius invited the En#s to invest in F:AHC as stoc4holders) an increase of the authori5ed capital stoc4 beca$e necessary to #ive each #roup e6ual (!;!) shareholdin#s as a#reed upon in the 1re; ,ubscription A#ree$ent. The authori5ed capital stoc4 was thus increased fro$ !) shares to 2)) shares with a par value of 1- each) with the En#s subscribin# to -)) shares and the Tius to !(+)* $ore shares in addition to their (!)2 shares to co$plete -)) shares. Thus) the sub3ect $atter of the contract was the -)) unissued shares of F:AHC stoc4 allocated to the En#s. ,ince these were unissued shares) the partiesA 1re;,ubscription A#ree$ent was in fact a subscription contract as de%ned under ,ection 7) Title B"" of the Corporation Code. A subscription contract necessarily involves the corporation as one of the contractin# parties since the sub3ect $atter of the transaction is property owned by the corporation U its shares of stoc4. Thus) the subscription contract (deno$inated by the parties as a 1re;,ubscription A#ree$ent) whereby the En#s invested 1- $illion for -)) shares of stoc4 was) fro$ the viewpoint of the law) one between the En#s and F:AHC) not between the En#s and the Tius. Etherwise stated) the Tius did not contract in their personal capacities with the En#s since they were not sellin# any of their own shares to the$. "t was F:AHC that did. Considerin# therefore that the real contractin# parties to the subscription a#ree$ent were F:AHC and the En#s alone) a civil case for rescission on the #round of breach of contract %led by the Tius in their personal capacities will not prosper. Assu$in# it had valid reasons to do so) only F:AHC (and certainly not the Tius) had the le#al personality to %le suit rescindin# the subscription a#ree$ent with the En#s inas$uch as it was the real party in interest therein. Article -<-- of the Civil Code provides that Gcontracts ta4e e2ect only between the parties) their assi#ns and heirs. . .G Therefore) a party who has not ta4en part in the transaction cannot sue or be sued for perfor$ance or for cancellation thereof) unless he shows that he has a real interest a2ected thereby. Issue [2]: .hether the rescission of 1re;,ubscription A#ree$ent would result in unauthori5ed li6uidation. Held [2]: The rescission of the 1re;,ubscription A#ree$ent will e2ectively result in the unauthori5ed distribution of the capital assets and property of the corporation) thereby violatin# the Trust Fund Hoctrine and the Corporation Code) since rescission of a subscription a#ree$ent is not one of the instances when distribution of capital assets and property of the corporation is allowed. &escission will) in the %nal analysis) result in the pre$ature li6uidation of the corporation without the bene%t of prior dissolution in accordance with ,ections --7) --*) --+ and -2 of the Corporation Code. An4 24a Daanib sa I4lesia n4 Dios Da, Dristo Hesus# HSD sa Bansan4 !ili6inas In5. vs. I4lesia n4 Dios 9a, Cristo Besus# Hali4i at Su1a, n4 Datoto1anan J9& -<7!+2) -2 Hece$ber 2-K First Hivision) Snares;,antia#o (D): < concur) - on oFcial leave Facts: The "#lesia n# Hios Nay Cristo Desus) 0ali#i at ,uhay n# Natotohanan ("HCD;0,N= Church of 9od in Christ Desus) the 1illar and 9round of Truth)) is a non;stoc4 reli#ious society or corporation re#istered in -+<7. ,o$eti$e in -+77) one Cliseo ,oriano and several other $e$bers of said corporation disassociated the$selves fro$ the latter and succeeded in re#isterin# on < 8arch -+77 a new non;stoc4 reli#ious society or corporation) na$ed "#lesia n# Hios Nay Nristo 0esus) 0ali#i at ,ali#an n# Natotohanan ("HND;0,N). En -7 Duly -+7+) "HCD;0,N %led with the ,CC a petition to co$pel "HND; 0,N to chan#e its corporate na$e (,CC Case -77(). En ( 8ay -+**) the ,CC rendered 3ud#$ent in favor of "HCD;0,N) orderin# "HND;0,N to chan#e its corporate na$e to another na$e that is not si$ilar or identical to any na$e already used by a corporation) partnership or association re#istered with the Co$$ission. No appeal was ta4en fro$ said decision. Hurin# the pendency of ,CC Case -77() ,oriano) et al.) caused the re#istration on 2! April -+* of An# 8#a Naanib sa "#lesia n# Hios Nay Nristo 0esus) 0.,.N) sa >ansan# 1ilipinas (ANJ"HN0;0,NK>1). The acrony$ G0.,.N.G stands for 0ali#i at ,ali#an n# Natotohanan. En 2 8arch -++() "HCD;0,N %led before the ,CC a petition (,CC Case <;+(;(7()) prayin# that ANJ"HN0;0,NK>1 be co$pelled to chan#e its corporate na$e and be barred fro$ usin# the sa$e or si$ilar na$e on the #round that the sa$e causes confusion a$on# their $e$bers as well as the public. N"HN0;0,N;>1 %led a $otion to dis$iss on the #round of lac4 of cause of action. The $otion to dis$iss was denied. Thereafter) for failure to %le an answer) ANJ"HN0;0,NK>1 was declared in default and "HCD;0,N was allowed to present its evidence e' parte. En 2 Nove$ber -++!) the ,CC rendered a decision orderin# ANJ"HN0;0,NK>1 to chan#e its corporate na$e. ANJ"HN0;0,NK>1 appealed to the ,CC Cn >anc (,CC;AC !<+). "n a decision dated ( 8arch -++7) the ,CC Cn >anc aFr$ed the above decision) upon a %ndin# that ANJ"HN0;0,NK>1As corporate na$e was identical or confusin#ly or deceptively si$ilar to that of "HCD;0,NAs corporate na$e. ANJ"HN0;0,NK>1 %led a petition for review with the Court of Appeals. En 7 Ectober -++7) the Court of Appeals rendered the decision aFr$in# the decision of the ,CC Cn >anc. ANJ"HN0;0,NK>1As $otion for reconsideration was denied by the Court of Appeals on -7 February -++2. ANJ"HN0;0,NK>1 %led the petition for review. Issue [1]: .hether the corporate na$es of ANJ"HN0;0,NK>1 and "HC0;0,N are confusin#ly si$ilar. Held [1]: The ,CC has the authority to de;re#ister at all ti$es and under all circu$stances corporate na$es which in its esti$ation are li4ely to spawn confusion. "t is the duty of the ,CC to prevent confusion in the use of corporate na$es not only for the protection of the corporations involved but $ore so for the protection of the public. ,ection -* of the Corporation Code provides that GNo corporate na$e $ay be allowed by the ,ecurities and C'chan#e Co$$ission if the proposed na$e is identical or deceptively or confusin#ly si$ilar to that of any e'istin# corporation or to any other na$e already protected by law or is patently deceptive) confusin# or is contrary to e'istin# laws. .hen a chan#e in the corporate na$e is approved) the Co$$ission shall issue an a$ended certi%cate of incorporation under the a$ended na$e.G Corollary thereto) the pertinent portion of the ,CC 9uidelines on Corporate Na$es states that G(d) "f the proposed na$e contains a word si$ilar to a word already used as part of the %r$ na$e or style of a re#istered co$pany) the proposed na$e $ust contain two other words di2erent 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 by another corporation) whether a business or a nonpro%t or#ani5ation) if $isleadin# or li4ely to in3ure in the e'ercise of its corporate functions) re#ardless of intent) $ay be prevented by the corporation havin# a prior ri#ht) by a suit for in3unction a#ainst the new corporation to prevent the use of the na$e. 0erein) the additional words GAn# 8#a Naanib G and G,a >ansan# 1ilipinas) "nc.G in ANJ"HN0;0,NK>1As na$e are $erely descriptive of and also referrin# to the $e$bers) or 4aanib) of "HC0;0,N who are li4ewise residin# in the 1hilippines. These words can hardly serve as an e2ective di2erentiatin# $ediu$ necessary to avoid confusion or diFculty in distin#uishin# ANJ"HN0;0,NK>1 fro$ "HC0;0,N. This is especially so) since both ANJ"HN0;0,NK>1 and "HC0;0,N are usin# the sa$e acrony$ U 0.,.N.= not to $ention the fact that both are espousin# reli#ious beliefs and operatin# in the sa$e place. 1arenthetically) it is well to $ention that the acrony$ 0.,.N. used by ANJ"HN0;0,NK>1 stands for G0ali#i at ,ali#an n# Natotohanan.G Then) too) the records reveal that in holdin# out their corporate na$e to the public) ANJ"HN0;0,NK>1 hi#hli#hts the do$inant words G"9:C,"A N9 H"E, NAS N&",TE 0C,L,) 0A:"9" AT ,A:"9AN N9 NATETE0ANAN)G which is stri4in#ly si$ilar to "HC0;0,NAs corporate na$e) thus $a4in# it even $ore evident that the additional words GAn# 8#a NaanibG and G,a >ansan# 1ilipinas) "nc.G) are $erely descriptive of and pertainin# to the $e$bers of "HC0;0,N. ,i#ni%cantly) the only di2erence between the corporate na$es of ANJ"HN0;0,NK>1 and "HC0;0,N are the words ,A:"9AN and ,L0AS. These words are synony$ous U both $ean #round) foundation or support. 0ence) this case is on all fours with Lniversal 8ills Corporation v. Lniversal Te'tile 8ills) "nc.) 22 where the Court ruled that the corporate na$es Lniversal 8ills Corporation and Lniversal Te'tile 8ills) "nc.) are undisputably so si$ilar that even under the test of Greasonable care and observationG confusion $ay arise. Issue [2]: .hether the #eneric word rule would apply to support ANJ"HN0;0,NK>1?s cause. Held [2]: The wholesale appropriation by ANJ"HN0;0,NK>1 of "HC0;0,NAs corporate na$e cannot %nd 3usti%cation under the #eneric word rule. A contrary rulin# would encoura#e other corporations to adopt verbati$ and re#ister an e'istin# and protected corporate na$e) to the detri$ent of the public. The fact 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) is of no conse6uence. "t does not authori5e the use by ANJ"HN0; 0,NK>1 of the essential and distin#uishin# feature of "HC0; 0,NAs re#istered and protected corporate na$e. L,5eu2 of t1e !1ili66ines vs. Court of A66eals <J9& --*+7) ! 8arch -++<K) Facts: :yceu$ of the 1hilippines "nc. had so$eti$e before co$$enced in the ,CC a proceedin# (,CC;Case No. -2(-) a#ainst the :yceu$ of >a#uio) "nc. to re6uire it to chan#e its corporate na$e and to adopt another na$e not Gsi$ilar JtoK or identicalG with that of petitioner. "n an Erder dated 2 April -+77) Associate Co$$issioner Dulio ,ulit held that the corporate na$e of petitioner and that of the :yceu$ of >a#uio) "nc. were substantially identical because of the presence of a Gdo$inantG word) i.e.) G:yceu$)G the na$e of the #eo#raphical location of the ca$pus bein# the only word which distin#uished one fro$ the other corporate na$e. The ,CC also noted that :yceu$ of the 1hilippines "nc. had re#istered as a corporation ahead of the :yceu$ of >a#uio) "nc. in point of ti$e) and ordered the latter to chan#e its na$e to another na$e Gnot si$ilar or identical JwithKG the na$es of previously re#istered entities. The :yceu$ of >a#uio) "nc. assailed the Erder of the ,CC before the ,upre$e Court (9& :; (7!+!). "n a 8inute &esolution dated -( ,epte$ber -+77) the Court denied the 1etition for &eview for lac4 of $erit. Cntry 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 it could %nd usin# the word G:yceu$G as part of their corporate na$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 this recourse had failed) and on 2( February -+*() :yceu$ of the 1hilippines instituted before the ,CC ,CC;Case 2!7+ to enforce what :yceu$ of the 1hilippines clai$s as its proprietary ri#ht to the word G:yceu$.G The ,CC hearin# oFcer rendered a decision sustainin# petitionerAs clai$ to an e'clusive ri#ht to use the word G:yceu$.G The hearin# oFcer relied upon the ,CC rulin# in the :yceu$ of >a#uio) "nc. case (,CC;Case -2(-) and held that the word G:yceu$G was capable of appropriation and that petitioner had ac6uired an enforceable 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 Castern 8indanao) "nc. and .estern 1an#asinan :yceu$) "nc.)) which are also educational institutions) to the ,CC Cn >anc) the decision of the hearin# oFcer was reversed and set aside. The ,CC Cn >anc did not consider the word G:yceu$G to have beco$e so identi%ed with :yceu$ of the 1hilippines as to render use thereof by other institutions as productive of confusion about the identity of the schools concerned in the $ind of the #eneral public. Lnli4e its hearin# oFcer) the ,CC Cn >anc held that the attachin# of #eo#raphical na$es to the word G:yceu$G served suFciently to distin#uish the schools fro$ one another) especially in view of the fact that the ca$puses of :yceu$ of the 1hilippines and those of the other :yceu$s were physically 6uite re$ote fro$ each other. :yceu$ of the 1hilippines then went on appeal to the Court of Appeals. "n its Hecision dated 2* Dune -++-) however) the Court of Appeals aFr$ed the 6uestioned Erders of the ,CC Cn >anc. :yceu$ of the 1hilippines %led a $otion for reconsideration) without success. :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 $ust) a$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 provides that GNo corporate na$e $ay be allowed by the ,ecurities an C'chan#e Co$$ission if the proposed na$e is identical or deceptively or confusin#ly si$ilar to that of any e'istin# corporation or to any other na$e already protected by law or is patently deceptive) confusin# or contrary to e'istin# laws. .hen a chan#e in the corporate na$e is approved) the Co$$ission shall issue an a$ended certi%cate of incorporation under the a$ended na$e.G The policy underlyin# the prohibition in ,ection -* a#ainst the re#istration of a corporate na$e which is Gidentical or deceptively or confusin#ly si$ilarG to that of any e'istin# corporation or which is Gpatently deceptiveG or Gpatently confusin#G or Gcontrary to e'istin# laws)G is the avoidance of fraud upon the public which would have occasion to deal with the entity concerned) the evasion of le#al obli#ations and duties) and the reduction of diFculties of ad$inistration and supervision over corporations. 0erein) the Court does not consider that the corporate na$es of the acade$ic institutions are Gidentical with) or deceptively or confusin#ly si$ilarG to that of :yceu$ of the 1hilippines "nc.. True enou#h) the corporate na$es of the other schools (defendant institutions) entities all carry the word G:yceu$G but confusion and deception are e2ectively 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 the :yceu$ of the 1hilippines) or that the G:yceu$ of Ca$alaniu#anG would be confused with the :yceu$ of the 1hilippines. Further) ety$olo#ically) the word G:yceu$G is the :atin word for the 9ree4 ly4eion which in turn referred to a locality on the river "lissius in ancient Athens Gco$prisin# an enclosure dedicated to Apollo and adorned with fountains and buildin#s erected by 1isistratus) 1ericles and :ycur#us fre6uented by the youth for e'ercise and by the philosopher Aristotle and his followers for teachin#.G "n ti$e) the word G:yceu$G beca$e associated with schools and other institutions providin# public lectures and concerts and public discussions. Thus today) the word G:yceu$G #enerally refers to a school or an institution of learnin#. ,ince G:yceu$G or G:iceoG denotes a school or institution of learnin#) it is not unnatural to use this word to desi#nate an entity which is or#ani5ed and operatin# as an educational institution. To deter$ine whether a #iven corporate na$e is GidenticalG or Gconfusin#ly or deceptively si$ilarG with another entityAs corporate na$e) it is not enou#h to ascertain the presence of G:yceu$G or G:iceoG in both na$es. Ene $ust evaluate corporate na$es in their entirety and when the na$e of :yceu$ of the 1hilippines is 3u'taposed with the na$es of private respondents) they are not reasonably re#arded as GidenticalG or Gconfusin#ly or deceptively si$ilarG with each other. Issue [2]: .hether the use by the :yceu$ of the 1hilippines of 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 associated or identi%ed with the petitioner institution in the $ind of the #eneral public (or at least that portion of the #eneral public which has to do with schools). Held [2]: The nu$ber alone of the private respondents in the present case su##ests stron#ly that the :yceu$ of the 1hilippinesA use of the word G:yceu$G has not been attended with 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 the 1hilippines re#istered its own corporate na$e with the ,CC and be#an usin# the word G:yceu$.G "t follows that if any institution had ac6uired an e'clusive ri#ht to the word G:yceu$)G that institution would have been the .estern 1an#asinan :yceu$) "nc. rather than :yceu$ of the 1hilippines. 0ence) :yceu$ of the 1hilippines is not entitled to a le#ally enforceable e'clusive ri#ht to use the word G:yceu$G in its corporate na$e and that other institutions $ay use G:yceu$G as part of their corporate na$es. Cor6orate La3 Case Di4est: !ioneer Insuran5e A. CA <&)=)C Case Brief 9.&. No. *(-+7 Duly 2*) -+*+ :essons Applicable: Hefective atte$pt to for$ a corp. does NET result in at least a partnership absent intent to for$ one (Corporate :aw) ACTS: -+7!: Dacob ,. :i$ is an owner;operator of ,outhern Airlines (,A:)) a sin#le proprietorship 8ay -7 -+7!: Dapan Ho$estic Airlines (DHA) and :i$ entered into a sales contract re#ardin#: 2 HC;]A type aircrafts - set of necessary spare parts Total: W -+) in install$ents 8ay 22 -+7!: 1ioneer "nsurance and ,urety Corp. as surety e'ecuted its surety bond in favor of DHA on behalf of its principal :i$ >order 8achinery and 0eacy C6uip$ent Co) "nc. Francisco and 8odesto Cervantes and Constancio 8a#lana contributed funds for the transaction based on the $isrepresentation of :i$ that they will for$a new corp.. to e'pand his business Dun - -+7!: :i$ as ,A: e'ecuted in favor of 1ioneer a deed of chattel $ort#a#e as security &estructurin# of obli#ation to chan#e the $aturity was done 2' wVo the 4nowled#e of other defendants $ade the surety of DHA prescribed so not entitled to rei$burse$ent Lpon default on the 2V* pay$ents) 1ioneer paid for hi$ and %led a petition for the foreclosure of chattel $ort#a#e as security CA aFr$ed Trial of 8erits: Enly :i$ is liable to pay ISSUE: .VN failure of respondents to incorporate ^ de facto partnership. HELD: NE. CA aFr$ed. 1artnership inter se does NET necessarily e'ist) for ordinarily CANNET be $ade to assu$e the relation of partners as bet. the$selves) when their purpose is that no partnership shall e'ists ,hould be i$plied only when necessary to do 3ustice bet. the parties (i.e. only pretend to $a4e others liable) :i$ never intended to for$ a corp. Li2 vs. !1ili66ine is1in4 $ear In/ustries In5. J9& -<7((*) < Nove$ber -+++K Third Hivision) 1an#aniban (D): < concur Facts: En behalf of GEcean Tuest Fishin# Corporation)G Antonio Chua and 1eter Sao entered into a Contract dated 7 February -++) for the purchase of %shin# nets of various si5es fro$ the 1hilippine Fishin# 9ear "ndustries) "nc. (1F9"). They clai$ed that they were en#a#ed in a business venture with :i$ Ton# :i$) who however was not a si#natory to the a#ree$ent. The total price of the nets a$ounted to 1!<2)(!. ( pieces of Moats worth 17*) were also sold to the Corporation. The buyers) however) failed to pay for the %shin# nets and the Moats= hence) 1F9" %led a collection suit a#ainst Chua) Sao and :i$ Ton# :i$ with a prayer for a writ of preli$inary attach$ent. The suit was brou#ht a#ainst the three in their capacities as #eneral partners) on the alle#ation that GEcean Tuest Fishin# CorporationG was a none'istent corporation as shown by a Certi%cation fro$ the ,ecurities and C'chan#e Co$$ission. En 2 ,epte$ber -++) the lower court issued a .rit of 1reli$inary Attach$ent) which the sheri2 enforced by attachin# the %shin# nets on board FV> :ourdes which was then doc4ed at the Fisheries 1ort) Navotas) 8etro 8anila. "nstead of answerin# the Co$plaint) Chua %led a 8anifestation ad$ittin# his liability and re6uestin# a reasonable ti$e within which to pay. 0e also turned over to 1F9" so$e of the nets which were in his possession. 1eter Sao %led an Answer) after which he was dee$ed to have waived his ri#ht to cross;e'a$ine witnesses and to present evidence on his behalf) because of his failure to appear in subse6uent hearin#s. :i$ Ton# :i$) on the other hand) %led an Answer with Counterclai$ and Crossclai$ and $oved for the liftin# of the .rit of Attach$ent. The trial court $aintained the .rit) and upon $otion of 1F9") ordered the sale of the %shin# nets at a public auction. 1F9" won the biddin# and deposited with the said court the sales proceeds of 1+). En -* Nove$ber -++2) the trial court rendered its Hecision) rulin# that 1F9" was entitled to the .rit of Attach$ent and that Chua) Sao and :i$) as #eneral partners) were 3ointly liable to pay 1F9". The trial court ruled that a partnership a$on# :i$) Chua and Sao e'isted based (-) on the testi$onies of the witnesses presented and (2) on a Co$pro$ise A#ree$ent e'ecuted by the three in Civil Case -(+2;8N which Chua and Sao had brou#ht a#ainst :i$ in the &TC of 8alabon) >ranch 72) for (a) a declaration of nullity of co$$ercial docu$ents= (b) a refor$ation of contracts= (c) a declaration of ownership of %shin# boats= (d) an in3unction and (e) da$a#es. :i$ appealed to the Court of Appeals (CA) which) aFr$ed the &TC. :i$ %led the 1etition for &eview on Certiorari. :i$ ar#ues) a$on# others) that under the doctrine of corporation by estoppel) liability can be i$puted only to Chua and Sao) and not to hi$. Issue: .hether :i$ should be held 3ointly liable with Chua and Sao. Held: Chua) Sao and :i$ had decided to en#a#e in a %shin# business) which they started by buyin# boats worth 1<.<! $illion) %nanced by a loan secured fro$ Desus :i$ who was :i$ Ton# :i$?s brother. "n their Co$pro$ise A#ree$ent) they subse6uently revealed their intention to pay the loan with the proceeds of the sale of the boats) and to divide e6ually a$on# the$ the e'cess or loss. These boats) the purchase and the repair of which were %nanced with borrowed $oney) fell under the ter$ Gco$$on fundG under Article -777. The contribution to such fund need not be cash or %'ed assets= it could be an intan#ible li4e credit or industry. That the parties a#reed that any loss or pro%t fro$ the sale and operation of the boats would be divided e6ually a$on# the$ also shows that they had indeed for$ed a partnership. The partnership e'tended not only to the purchase of the boat) but also to that of the nets and the Moats. The %shin# nets and the Moats) both essential to %shin#) were obviously ac6uired in furtherance of their business. "t would have been inconceivable for :i$ to involve hi$self so $uch in buyin# the boat but not in the ac6uisition of the aforesaid e6uip$ent) without which the business could not have proceeded. The sale of the boats) as well 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 own property but an asset of the partnership. "t is not unco$$on to re#ister the properties ac6uired fro$ a loan in the na$e of the person the lender trusts) who in this case is :i$ Ton# :i$ hi$self. After all) he is the brother of the creditor) Desus :i$. "t is unreasonable U indeed) it is absurd U for petitioner to sell his property to pay a debt he did not incur) if the relationship a$on# the three of the$ was $erely that of lessor;lessee) instead of partners. As to :i$As ar#u$ent that under the doctrine of corporation by estoppel) liability can be i$puted only to Chua and Sao) and not to hi$= ,ection 2- of the Corporation Code of the 1hilippines provides that GAll persons who assu$e to act as a corporation 4nowin# it to be without authority to do so shall be liable as #eneral partners for all debts) liabilities and da$a#es incurred or arisin# as a result thereof: 1rovided however) That when any such ostensible corporation is sued on any transaction entered by it as a corporation or on any tort co$$itted by it as such) it shall not be allowed to use as a defense its lac4 of corporate personality. Ene who assu$es an obli#ation to an ostensible corporation as such) cannot resist perfor$ance thereof on the #round that there was in fact no corporation.G Thus) even if the ostensible corporate entity is proven to be le#ally none'istent) a party $ay be estopped fro$ denyin# its corporate e'istence. GThe reason behind this doctrine is obvious U an unincorporated association has no personality and would be inco$petent to act and appropriate for itself the power and attributes of a corporation as provided by law= it cannot create a#ents or confer authority on another to act in its behalf= thus) those who act or purport to act as its representatives or a#ents do so without authority and at their own ris4. And as it is an ele$entary principle of law that a person who acts as an a#ent without authority or without a principal is hi$self re#arded as the principal) possessed of all the ri#ht and sub3ect to all the liabilities of a principal) a person actin# or purportin# to act on behalf of a corporation which has no valid e'istence assu$es such privile#es and obli#ations and beco$es personally liable for contracts entered into or for other acts perfor$ed as such a#ent.G The doctrine of corporation by estoppel $ay apply to the alle#ed corporation and to a third party. "n the %rst instance) an unincorporated association) which represented itself to be a corporation) will be estopped fro$ denyin# its corporate capacity in a suit a#ainst it by a third person who relied in #ood faith on such representation. "t cannot alle#e lac4 of personality to be sued to evade its responsibility for a contract it entered into and by virtue of which it received advanta#es and bene%ts. En the other hand) a third party who) 4nowin# an association to be unincorporated) nonetheless treated it as a corporation and received bene%ts fro$ it) $ay be barred fro$ denyin# its corporate e'istence in a suit brou#ht a#ainst the alle#ed corporation. "n such case) all those who bene%ted fro$ the transaction $ade by the ostensible corporation) despite 4nowled#e of its le#al defects) $ay be held liable for contracts they i$pliedly assented to or too4 advanta#e of. There is no dispute that 1F9" is entitled to be paid for the nets it sold. The only 6uestion here is whether :i$ should be held 3ointly liable with Chua and Sao. :i$ contests such liability) insistin# that only those who dealt in the na$e of the ostensible corporation should be held liable. Althou#h technically it is true that :i$ did not directly act on behalf of the corporation= however) havin# reaped the bene%ts of the contract entered into by persons with who$ he previously had an e'istin# relationship) he is dee$ed to be part of said association and is covered by the scope of the doctrine of corporation by estoppel.
A Short View of the Laws Now Subsisting with Respect to the Powers of the East India Company
To Borrow Money under their Seal, and to Incur Debts in
the Course of their Trade, by the Purchase of Goods on
Credit, and by Freighting Ships or other Mercantile
Transactions