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JOSE C. TUPAZ IV and PETRONILA C. TUPAZvs.

THE COURT OF APPEALS and BANK OF THE PHILIPPINE


ISLANDS
Facts:
Petitioners Jose C. Tupaz IV and Petronila C. Tupaz (petitioners)
were Vice-President for Operations and Vice-President/Treasurer,
respectively, of El Oro Engraver Corporation (El Oro Corporation). El
Oro Corporation had a contract with the Philippine Army to supply the
latter with survival bolos.
To finance the purchase of the raw materials for the survival bolos,
petitioners, on behalf of El Oro Corporation, applied with respondent
Bank of the Philippine Islands (respondent bank) for two commercial
letters of credit. The letters of credit were in favor of El Oro
Corporations
suppliers,
Tanchaoco
Manufacturing
Incorporated[3] (Tanchaoco Incorporated) and Maresco Rubber and
[4]
Retreading Corporation (Maresco Corporation). Respondent bank
granted petitioners application. Simultaneous with the issuance of the
letters of credit, petitioners signed trust receipts in favor of respondent
bank. On 30 September 1981, petitioner Jose C. Tupaz IV (petitioner
Jose Tupaz) signed, in his personal capacity, a trust receipt
corresponding to Letter of Credit No. 2-00896-3 (for P564,871.05).
Petitioner Jose Tupaz bound himself to sell the goods covered by the
letter of credit and to remit the proceeds to respondent bank, if sold, or
to return the goods, if not sold, on or before 29 December 1981.
On 9 October 1981, petitioners signed, in their capacities as
officers of El Oro Corporation, a trust receipt corresponding to Letter of
Credit No. 2-00914-5 (for P294,000). Petitioners bound themselves to
sell the goods covered by that letter of credit and to remit the proceeds
to respondent bank, if sold, or to return the goods, if not sold, on or
before 8 December 1981.
After Tanchaoco Incorporated and Maresco Corporation
delivered the raw materials to El Oro Corporation, respondent bank
paid the former P564,871.05 and P294,000, respectively.
Petitioners did not comply with their undertaking under the trust
receipts. Respondent bank made several demands for payments but El
Oro Corporation made partial payments only. On 27 June 1983 and 28
June
1983,
respondent
banks
counsel[5]and
its
representative[6] respectively sent final demand letters to El Oro
Corporation. El Oro Corporation replied that it could not fully pay its
debt because the Armed Forces of the Philippines had delayed paying
for the survival bolos.
Respondent bank charged petitioners with estafa .
RTC: acquitting petitioners of estafa on reasonable doubt. However,
the trial court found petitioners solidarily liable with El Oro Corporation
CA: Affirmed
ISSUE: WON PETITIONERS ARE NOT PERSONALLY LIABLE TO
xxx RESPONDENT BANK, SINCE THEY SIGNED THE LETTER[S]
OF CREDIT AS SURETY AS OFFICERS OF EL ORO, AND
THEREFORE, AN EXCLUSIVE LIABILITY OF EL ORO
HELD:
IT affirmed the Court of Appeals ruling with the modification that
petitioner Jose Tupaz is liable as guarantor of El Oro Corporations
debt under the trust receipt dated 30 September 1981.
A corporation, being a juridical entity, may act only through its
directors, officers, and employees. Debts incurred by these individuals,
acting as such corporate agents, are not theirs but the direct liability of
the corporation they represent.[12] As an exception, directors or officers
are personally liable for the corporations debts only if they so
contractually agree or stipulate.[13]
In the trust receipt dated 9 October 1981, petitioners signed as
officers of El Oro Corporation. Thus, under petitioner Petronila Tupazs
signature are the words Vice-PresTreasurer and under petitioner
Jose Tupazs signature are the words Vice-PresOperations. By so
signing that trust receipt, petitioners did not bind themselves personally
liable for El Oro Corporations obligation. Hence, for the trust receipt
dated 9 October 1981, we sustain petitioners claim that they are not
personally liable for El Oro Corporations obligation.

For the trust receipt dated 30 September 1981, the dorsal


portion of which petitioner Jose Tupaz signed alone, we find that he did
so in his personal capacity. Petitioner Jose Tupaz did not indicate that
he was signing as El Oro Corporations Vice-President for Operations.
Hence, petitioner Jose Tupaz bound himself personally liable for El
Oro Corporations debts. Not being a party to the trust receipt dated 30
September 1981, petitioner Petronila Tupaz is not liable under such
trust receipt.
PETRON CORPORATION AND PETER C. MALIGRO vs.
NATIONAL LABOR RELATIONS COMMISSION AND CHITO S.
MANTOS

Petron, through its Cebu District Office, hired the herein


private respondent Chito S. Mantos, an Industrial Engineer,
as a managerial, professional and technical employee with
initial designation as a Bulk Plant Engineering Trainee.
He attained regular employment status and was later on
designated as a Bulk Plant Relief Supervisor, remaining as
such for the next five years while being assigned to the
different plants and offices of Petron within the Visayas area.
Mantos' services were terminated effective by reason of his
continued
absences,
as
well
as
for
Insubordination/Discourtesy for making false accusations
against his superior.
Respondent filed a case contending that he has been
constructively dismissed.

ISSUE:
Whether or not the NLRC erred in holding petitioner Peter Maligro
jointly and severally liable with petitioner Petron for the money claims
of the private respondent., YES
RULING:
Settled is the rule in this jurisdiction that a corporation is invested by
law with a legal personality separate and distinct from those acting for
and in its behalf and, in general, from the people comprising it. Thus,
obligations incurred by corporate officers acting as corporate agents
are not theirs but the direct accountabilities of the corporation they
represent. True, solidary liabilities may at times be incurred by
corporate officers, but only when exceptional circumstances so
warrant. For instance, in labor cases, corporate directors and officers
may be held solidarily liable with the corporation for the termination of
employment if done with malice or in bad faith.
The findings of NLRC cannot justify a finding of personal liability on the
part of Maligro inasmuch as said findings do not point to Maligro's
extreme personal hatred and animosity with the respondent. It cannot,
therefore, be said that Maligro was motivated by malice and bad faith
in connection with private respondent's dismissal from the service.
Hence, petitioner Peter C. Maligro is ABSOLVED from any liability
adjudged against co-petitioner Petron Corporation.
SOLID HOMES, INC. vs. HON. COURT OF APPEALS, STATE
FINANCING CENTER, INC., and REGISTER OF DEEDS FOR RIZAL

Solid Homes executed in favor of State Financing a Real


Estate Mortgage on its properties in order to secure the
payment of a loan of P10,000,000.00 which the former
obtained from the latter. Subsequent loans were approved
by same creditor.
When the loan obligations became due and payable, State
Financing made repeated demands upon Solid Homes for
the payment thereof, but the latter failed to do so.
Foreclosure proceedings were initiated. Respondent failed to
annotate petitioners right of repurchase on the title hence
this petition.

ISSUE:
Whether or not State Financing is liable for damages. NO
RULING:
The petitioner has not shown any and indeed the Court finds none
of the above-mentioned exceptions to warrant a departure from the
general rule.
The only legal transgression of State Financing was its failure to
observe the proper procedure in effecting the consolidation of the titles
in its name. But this does not automatically entitle the petitioner to
damages absent convincing proof of malice and bad faith on the part
of private respondent and actual damages suffered by petitioner as a
direct and probable consequence thereof. In fact, the evidence
proffered by petitioner consist of mere conjectures and speculations
with no factual moorings. Furthermore, such transgression was
addressed by the lower courts when they nullified the consolidated of
ownership over the subject properties in the name of respondent
corporation, because it had been effected in contravention of the
provisions of Article 1607 of the Civil Code. Such rulings are
consistent with law and

CHINA BANKING CORPORATION, petitioner, vs. DYNESEM


ELECTRONICS CORPORATION, respondent.
FACTS:
1. Dynetics, Inc. (Dynetics) and Elpidio O. Lim borrowed a total
of 8M from petitioner China Banking Corporation, evidenced
by six promissory notes.
2. When the borrowers failed to pay the obligations after the
same became due, petitioner consequently filed a complaint
for sum of money against them. However, summons was
not served on Dynetics because it had already closed down.
On the other hand, Lim denied that he promised to pay
jointly and severally to petitioner.
3. The case was scheduled for pre-trial with respect to Lim and
the case against Dynetics was archived.
4. Subsequently, petitioner filed an amended complaint
impleading Dyne-Sem Electronics Corporation (Dyne-Sem)
and its stockholders Vicente Chuidian, Antonio Garcia and
Jacob Ratinoff, alleging that Dyne-Sem is Dynetics alter ego
because of the following circumstances:
a. Dynetics and respondent are both engaged in the
same line of business;
b. The principal office and factory site of both
Dynetics and Dyne-Sem are located at Avocado
Road, FTI Complex, Taguig, Matro Manila;
c. Dyne-Sem acquired some of the machineries and
equipment of Dynetics from banks which acquired
the same through foreclosure; and
d. Dyne-Sem retained some of the officers of
Dynetics.
5. Respondent filed its answer alleging that the incorporators
and stockholders of Dyne-Sem are totally different from
those of Dynetics, and not one of them has ever been a
stockholder or officer of the latter; and that the facilities and
equipment being used by respondent were legitimately and
validly acquired under arms-length transactions and not
merely taken over nor acquired from Dynetics as secondhand items to keep costs down. It also alleged that the
present plant site of respondent is under lease from Food
Terminal Inc. (FTI), a government-controlled corporation,
where a number of other firms organized in 1986 and also
engaged in the same or similar business have likewise

6.
7.
8.

established their factories; practical convenience and


nothing else was behind respondents choice of plant site.
The case against the stockholders of Dyne-Sem was
archived since summons had remained unserved.
After hearing, the court a quo dismissed the case and held
that Dyne-Sem is not an alter ego of Dynetics.
On appeal, the CA also held that respondent was not an
alter ego of Dynetics because the two corporations had
different Articles of Incorporation, no merger or absorption
took place between the two, and what transpired was a mere
sale of the assets of Dynetics to respondent.

ISSUE: IS DYNE-SEM AN ALTER EGO OF DYNETICS SUCH THAT


THE DOCTRINE OF PIERCING THE VEIL OF CORPORATE
FICTION IS APPLICABLE?
HELD: No. The question of w/n one corp is merely an alter ego of
another is purely one of fact. This Court is not a trier of facts. The
factual findings of the trial and appellate courts and consequently their
conclusions were supported by the evidence on record.
The gen rule is that a corp has a personality separate and
distinct from that of its stockholders and other corps to which it may be
connected. To disregard the separate juridical personality of a corp,
the wrongdoing must be proven clearly and convincingly. In this case,
petitioner failed to prove that Dyne-Sem was organized and controlled
and its affairs conducted in a manner that made it merely an
instrumentality, agency, conduit or adjunct of Dynetics, or that it was
established to defraud Dynetics creditors including petitioner.
The similarity of business of the two corps, absent sufficient
showing that the corporate entitle was purposely used as a shield to
defraud creditors and third persons of their rights.
Likewise, the respondents acquisition of some of the
machineries and equipment of Dynetics was not proof that respondent
was formed to defraud petitioner. No merger took place between the
two corps. What took place was a sale of the assets of the Dynetics to
Dyne-Sem. Thus where one corp sells or otherwise transfers all its
assets to another corp for value, the latter is not, by that fact alone,
liable for the debts and liabilities of the transferor. Evidence
established that Dynetics acquired the machineries in question for
considerable amounts in valid auctions. Finally, it may be true that
respondent later hired Dynetics former Vice-P LuviniaMaglaya and
Asst Corporate Counsel VirgilioGesmundo. However, this alone
cannot conclude that Dyne-Sem is an alter ego of Dynetics. In fact,
even the overlapping of incorporators will not necessarily lead to such
inference and justify the piercing of the veil of corporate fiction. Much
more has to be proven.
PHILIPPINE NATIONAL BANK vs. RITRATTO GROUP, INC.
RIATTO INTERNATIONAL, INC., and DADASAN GENERAL
MERCHANDISE
FACTS:
1. Philippine National Bank International Finance Ltd. (PNBIFL), a subsidiary company of PNB, extended a letter of
credit in favour of respondents for $300K secured by four
parcels of land in Makati City. This loan was subsequently
increased and decreased and finally set at $1.421M in April
1998. Respondents made repayments of the loan by
remitting those amounts to their loan account with PNB-IFL.
2. However, as of Apr 30, 1998, respondents outstanding
obligations stood at $1.497M. Pursuant to the terms of the
real estate mortgages, PNB-IFL, through its attorney-in-fact
PNB, notified the respondents of the foreclosure of all the
real estate mortgages and that the properties subject thereof
were to be sold at a public auction on May 27, 1999.

3.

May 25, 1999: respondents filed a complaint for injunction


with prayer for issuance of writ of prelim injunction and/or
TRO.
RTC issued 72-hr TRO.
June 8, at the hearing of the application for prelim injunction,
petitioner was given time to file a reply.
June 25, petitioner filed a motion to dismiss on the grounds
of failure to state cause of action and absence of any privity
between the petitioner and respondents. This motion was
dismissed.

The petitioner was sued because it acted as an atty-in-fact of


PNB-IFL in initiating the foreclosure proceedings. A suit against an
agent cannot without compelling reasons be considered a suit against
the principal. In this case, the suit is directed only against the agent,
not the principal.
All told, respondents do not have a cause of action against
the petitioner as the latter is not privy to the contract between PNB-IFL
and the respondents.
DY-DUMALASA
GR

No.

178760

FACTS:
June 30, RTC Judge issued an order for the issuance of a
writ of prelim injunction.
4.

Petitioner, thereafter, in a petition for certiorari and


prohibition assailed the issuance of the writ of prelim
injunction before CA. CA dismissed this. Hence, this
recourse.

ISSUE: W/N PNB is privy to the contract between PNB-IFL and the
respondents.
HELD: NO. The mere fact that a corp owns all of the stocks of another
corp, taken alone is not sufficient to justify their being treated as one
entity. If used to perform legitimate functions, a subsidiarys separate
existence may be respected, and the liability of the parent corp as well
as the subsidiary will be confined to those arising in their respective
business. The courts may in the exercise of judicial discretion step in to
prevent the abuses of separate entity privilege and pierce the veil of
corporate entity.
In the case at bar, respondents fail to show any cogent
reason why the separate entities of the PNB and PNB-IFL should be
disregarded.
As held in Concept Builders, Inc. vs. NLRC, the test in
determining the applicability of the doctrine of piercing the veil of
corporate fiction is:
1. Control, not mere majority or complete control, but
complete domination, not only of finances but of policy
and business practice in respect to the transaction
attacked so that the corporate entity as to this
transaction had at the time no separate mind, will or
existence of its own.
2. Such control must have been used by the defendant to
commit fraud or wrong, to perpetuate the violation of a
statutory or other positive legal duty, or dishonest and
unjust act in contravention of plaintiffs legal rights; and
3. The aforesaid control and breach of duty must
proximately cause the injury or unjust loss complained
of.
The absence of any of these elements prevents
piercing the corporate veil.
In applying the
instrumentality or alter ego doctrine, the courts are
concerned with reality and not form, with how the
corporation operated and the individual defendants
relationship to the operation.
Aside from the fact that PNB-IFL is a wholly owned
subsidiary of petitioner PNB, there is no showing of the indicative
factors that the former corporation is a mere instrumentality of the latter
are present. Neither is there a demonstration that any of the evils
sought to be prevented by the doctrine of piercing the corporate veil
exists. Inescapably therefore, the doctrine of piercing the corporate
veil based on the alter ego or instrumentality doctrine finds no
application in this case.

Respondents Domingo, et al. are former employees of HELIOS, a


closed domestic corporation engaged in soap manufacturing located in
Muntinlupa, of w/c Dy-Dumalasa (petitioner) is a stockholder, a
member of the Board of Directors, and Acting Corporate Secretary.
Respondents filed a Complaint against Helios for illegal dismissal or
illegal closure of business, non-payment of salaries and other money
claims
against
HELIOS.
The Labor Arbiter found HELIOS, its members of the Boards, and its
stockholders
liable.
The Labor Arbiter found that the closure of the Muntinlupa office/plant
was a sham, as HELIOS simply relocated its operations to a new plant
in Carmona, Cavite under the new name of Pat & Suzara, in
response
to
the
newly-established
local
union.
Pursuant to a Writ, Sheriff Datu issued a Notice of Levy on Real
Property under which a house and lot in Ayala-Alabang in the name of
petitioner and her husband Leonardo Dy-Dumalasa were levied upon.
Petitioner moved to quash the Writ, putting up the defense of corporate
fiction.
The NLRC modified the Labor Arbiters Order, holding that petitioner is
not jointly and severally liable with HELIOS for respondents claims.
ISSUES: W/N petitioner Dy-Dumalasa can escape liability by invoking
the
defense
of
corporate
fiction.

HELD:
Taking into account the peculiar circumstances of the cases, HELIOS
knowledge of the pendency thereof and its efforts to resist them are
deemed to be knowledge and action of petitioner. That petitioner and
her fellow members of the Board refused to heed the summons and
avail of the opportunity to defend themselves as they instead opted to
hide behind the corporate veil does not shield them from the
application
of
labor
laws.
Petitioner can not now thus question the implementation of the Writ of
Execution on her on the pretext that jurisdiction was not validly
acquired over her person or that HELIOS has a separate and distinct
personality as a corporate entity. To apply the normal precepts on
corporate fiction and the technical rules on service of summons would
be to overturn the bias of the Constitution and the laws in favor of
labor.
The Labor Arbiter found HELIOS et al. guilty of bad faith when they
closed the companys Muntinlupa plant 15 days before the scheduled
cessation of operations, only to reestablish a plant in Carmona, Cavite
sometime later as "Pat & Suzara," in response to the newly-created
workers
union.
As to HELIOS being a separate juridical entity, the Labor Arbiter held
that it and "Pat & Suzara" are one and the same, using the same
machineries
and
personnel
in
the
new
plant.
The Labor Arbiter thus concluded that "indeed, fraud and bad faith on

the part of the management are well-established" and, as such,


HELIOS
et
al.
are
liable
for
the
judgment
award.
While the appellate court reinstated the Labor Arbiters decision, it held
that since its fallo did not indicate with certainty the solidary nature of
the obligation, the obligation is merely joint.
RYUICHI YAMAMOTO v. NISHINO LEATHER INDUSTRIES, INC.
and
IKUO
NISHINO
551
SCRA
447
(2008)
To disregard the separate juridical personality of a corporation, the
wrongdoing or unjust act in contravention of a plaintiffs legal rights
must be clearly and convincingly established. Also, without
acceptance,
a
mere
offer
produces
no
obligation.
FACTS:
Ryuichi Yamamoto and Ikuo Nishino agreed to enter into a joint
venture wherein Nishino would acquire such number of shares of stock
equivalent to 70% of the authorized capital stock of the corporation.
However, Nishino and his brother Yoshinobu Nishino acquired more
than 70% of the authorized capital stock. Negotiations subsequently
ensued in light of a planned takeover by Nishino who would buy-out
the shares of stock of Yamamoto who was advised through a letter that
he may take all the equipment/ machinery he had contributed to the
company (for his own use and sale) provided that the value of such
machines is deducted from the capital contributions which will be paid
to him. However, the letter requested that he give his comments on all
the
above,
soonest.
On the basis of the said letter, Yamamoto attempted to recover the
machineries but Nishino hindered him to do so, drawing him to file a
Writ of Replevin. The Trial Court issued the writ. However, on appeal,
Nishino claimed that the properties being recovered were owned by
the corporation and the above-said letter was a mere proposal which
was not yet authorized by the Board of Directors. Thus, the Court of
Appeals reversed the trial courts decision despite Yamamotos
contention that the company is merely an instrumentality of the
Nishinos.
ISSUE:
Whether or not Yamamoto can recover the properties he contributed to
the company in view of the Doctrine of Piercing the Veil of Corporate
Fiction
and
Doctrine
of
Promissory
Estoppel.
HELD:
One of the elements determinative of the applicability of the doctrine of
piercing the veil of corporate fiction is that control must have been
used by the defendant to commit fraud or wrong, to perpetuate the
violation of a statutory or other positive legal duty, or dishonest and
unjust act in contravention of the plaintiffs legal rights. To disregard
the separate juridical personality of a corporation, the wrongdoing or
unjust act in contravention of a plaintiffs legal rights must be clearly
and convincingly established; it cannot be presumed. Without a
demonstration that any of the evils sought to be prevented by the
doctrine is present, it does not apply. Estoppel may arise from the
making of a promise. However, it bears noting that the letter was
followed by a request for Yamamoto to give his comments on all the
above, soonest. What was thus proffered to Yamamoto was not a
promise, but a mere offer, subject to his acceptance. Without
acceptance, a mere offer produces no obligation. Thus, the
machineries and equipment, which comprised Yamamotos
investment, remained part of the capital property of the corporation.