Justice Teresita Leonardo-De Castro Cases

(2008-2015)
CORPORATION LAW

DOCTRINE OF SEPARATE LEGAL PERSONALITY

Stockholders cannot claim ownership over corporate properties by virtue of the
Minutes of a Stockholders meeting which merely evidence a loan agreement
between the stockholders and the corporation. As such, there interest over the
properties are merely inchoate. - Philippine National Bank vs. Merelo B. Aznar
et al., G.R. No. 171805, May 30, 2011
DOCTRINE OF PIERCING THE VEIL OF CORPORATE FICTION
In this connection, case law lays down a three-pronged test to determine the
application of the alter ego theory, which is also known as the instrumentality
theory, namely:
(1) Control, not mere majority or complete stock 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 right; and
(3) The aforesaid control and breach of duty must have proximately caused the
injury or unjust loss complained of.
The first prong is the instrumentality or control test. This test requires that
the subsidiary be completely under the control and domination of the parent. It
examines the parent corporations relationship with the subsidiary. It inquires
whether a subsidiary corporation is so organized and controlled and its affairs are so
conducted as to make it a mere instrumentality or agent of the parent corporation
such that its separate existence as a distinct corporate entity will be ignored. It
seeks to establish whether the subsidiary corporation has no autonomy and the
parent corporation, though acting through the subsidiary in form and appearance,
is operating the business directly for itself.
The second prong is the fraud test. This test requires that the parent
corporations conduct in using the subsidiary corporation be unjust, fraudulent or
wrongful. It examines the relationship of the plaintiff to the corporation. It
recognizes that piercing is appropriate only if the parent corporation uses the
subsidiary in a way that harms the plaintiff creditor. As such, it requires a showing of
an element of injustice or fundamental unfairness.
The third prong is the harm test. This test requires the plaintiff to show that the
defendants control, exerted in a fraudulent, illegal or otherwise unfair manner
toward it, caused the harm suffered. A causal connection between the fraudulent

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conduct committed through the instrumentality of the subsidiary and the injury
suffered or the damage incurred by the plaintiff should be established. The plaintiff
must prove that, unless the corporate veil is pierced, it will have been treated
unjustly by the defendants exercise of control and improper use of the corporate
form and, thereby, suffer damages. - Development Bank of the Philippines vs.
Hydro Resources Contractors Corporation, GR. No. 167603, 167561 &
167603, March 13, 2013
GOVERNMENT CORPORATIONS
The PNRC enjoys a special status as an important ally and auxiliary of the
government in the humanitarian field in accordance with its commitments under
international law. Its structure is sui generis. The Court should not shake its
existence to the core in an untimely and drastic manner that would not only have
negative consequences to those who depend on it in times of disaster and armed
hostilities but also have adverse effects on the image of the Philippines in the
international community. - Dante V. Liban, Reynaldo M. Bernardo and
Salvador M. Viari vs. Richard J. Gordon, Philippine National Red Cross,
Intervenor, G. R. No. 175352, January 18, 2011
Not all corporations, which are not government owned or controlled, are ipso facto
to be considered private corporations as there exists another distinct class of
corporations or chartered institutions which are otherwise known as "public
corporations." These corporations are treated by law as agencies or
instrumentalities of the government which are not subject to the tests of ownership
or control and economic viability but to different criteria relating to their public
purposes/interests or constitutional policies and objectives and their administrative
relationship to the government or any of its Departments or Offices. - Boy Scouts
of the Philippines vs. Commission On Audit, G.R. No. 177131, June 7, 2011
CORPORATE NAME
While the SC stand by in its pronouncement on the importance of the corporate
name to the very existence of corporations and the significance thereof in the
corporations right to sue, it shall not go so far as to dismiss a case filed by the
proper party using its former name when adequate identification is presented. - NM
Rothschild & Sons (Australia) Limited vs. Lepanto Consolidated Mining
Company, G.R. No. 175799, November 28, 2011
BOARD OF DIRECTORS/CORPORATE OFFICERS
Except for the powers which are expressly conferred on it by the Corporation Code
and those that are implied by or are incidental to its existence, a corporation has no
powers. Physical acts, like the signing of documents, can be performed only by
natural persons duly authorized for the purpose by corporate bylaws or by a specific
act of the board of directors. - Cebu Bionic Builders Supply, Inc. and Lydia Sia
vs. Development Bank of the Philippines, Jose To Chip, Patricio Yap and
Roger Balila, G.R. No. 154366, November 17, 2010
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The requirement of the certification of non-forum shopping is rooted in the principle
that a party-litigant shall not be allowed to pursue simultaneous remedies in
different fora, as this practice is detrimental to an orderly judicial
procedure. However, the Court has relaxed, under justifiable circumstances, the rule
requiring the submission of such certification considering that, although it is
obligatory, it is not jurisdictional. Not being jurisdictional, it can be relaxed under
the rule of substantial compliance. Thus, a President of a corporation, among other
enumerated corporate officers and employees, can sign the verification and
certification against of non-forum shopping in behalf of the said corporation without
the benefit of a board resolution. - South Cotabato Communications
Corporation and Gauvain J. Benzonan vs. Hon. Patricia A. Sto. Tomas,
Secretary of Labor And Employment, Rolando Fabrigar, Merlyn Velarde,
Vince Lamboc, Felipe Galindo, Leonardo Miguel, Julius Rubin, Edel
Roderos, Merlyn Coliao and Edgar Jopson, G.R. No. 173326, December 15,
2010
DERIVATIVE SUIT
A derivative suit cannot prosper without first complying with the legal requisites for
its institution. Thus, a complaint which contained no allegation whatsoever of any
effort to avail of intra-corporate remedies allows the court to dismiss it, even motu
proprio. Indeed, even if petitioners thought it was futile to exhaust intra-corporate
remedies, they should have stated the same in the Complaint and specified the
reasons for such opinion. The requirement of this allegation in the Complaint is not
a useless formality which may be disregarded at will. - Nestor Ching and Andrew
Wellington vs. Subic Bay Golf And Country Club, Inc., Hu Ho Hsiu Lien alias
Susan Hu, Hu Tsung Chieh alias Jack Hu, Hu Tsung Hui, Hu Tsung Tzu and
Reynald R. Suarez, G.R. No. 174353, September 10, 2014
MERGER
FEBTC employees that were absorbed by petitioner upon the merger between
FEBTC and BPI should be covered by the Union Shop Clause found in the existing
CBA between petitioner and respondent Union. The Court believes that it is contrary
to public policy to declare the former FEBTC employees as forming part of the
assets or liabilities of FEBTC that were transferred and absorbed by BPI in the
Articles of Merger. Assets and liabilities, should be deemed to refer only to property
rights and obligations of FEBTC and do not include the employment contracts of its
personnel. A corporation cannot unilaterally transfer its employees to another
employer like chattel. Even though FEBTC employees had no choice or control over
the merger of their employer with BPI, they had a choice whether or not they would
allow themselves to be absorbed by BPI. Employment is a personal consensual
contract and absorption by BPI of a former FEBTC employee without the consent of
the employee is in violation of an individuals freedom to contract. - Bank of the
Philippine Islands vs. BPI Employees Union-Davao Chapter-Federation of
Unions in BPI Unibank, G.R. No. 164301, August 10, 2010
SECURITIES AND REGULATIONS CODE
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It is axiomatic that jurisdiction over the subject matter is conferred by law and is
determined by the allegations of the complaint or the petition irrespective of
whether the plaintiff is entitled to all or some of the claims or reliefs asserted
therein. - Philippine Stock Exchange, Inc. vs. The Manila Banking
Corporation et.al, G.R. No. 147778. July 23, 2008
INTRA-CORPORATE CONTROVERSIES
Civil cases involving the inspection of corporate books are governed by the rules of
procedure set forth in the Interim Rules of Procedure for Intra-Corporate
Controversies under Republic Act No. 8799 (Interim Rules). In order to assail the
decision or order issued under the Interim order must be sought from the appellate
court to enjoin the enforcement or implementation of the decision or order, and
unless a restraining order is so issued, the decision or order rendered under the
Interim Rules shall remain to be immediately executory.
In the inspection of Corporate Books, the burden of proof lies with the
corporation who refuses to grant to the stockholder the right to inspect corporate
records.
Supervening events refer to facts which transpire after judgment has become final
and executory or to new circumstances which developed after the judgment has
acquired finality, including matters which the parties were not aware of prior to or
during the trial as they were not yet in existence at that time, a supervening event
affects or changes the substance of the judgment and renders the execution thereof
inequitable, impossible or unjust. - Dee Ping Wee, Araceli Wee and Marina U.
Tan vs. Lee Hiong Wee and Rosalind Wee, G.R. No. 169345, August 25,
2010
BANKING LAWS
Banks, their business being impressed with public interest, are expected to exercise
more care and prudence than private individuals in their dealings, even those
involving registered lands. The rule that persons dealing with registered lands can
rely solely on the certificate of title does not apply to banks. - Philippine Trust
Company (also known as Philtrust Bank) vs. Hon. Court of Appeals and
Forfom Development Corporation, G.R. No. 150318, November 22, 2010
Bangko Sentral ng Pilipinas placed Rural Bank of Tuba (RBTI) under receivership with
the Philippine Deposit Insurance Corporation as the receiver. Accordingly, PDIC filed
a petition for assistance in the liquidation of RBTI which was approved by the trial
court. As an incident of the proceeding, BIR intervened as one of the creditors of
RBTI. BIR contends that a tax clearance is required before the approval of project of
distribution of the assets of a bank. In denying their contention, the Court held the
law expressly provides that debts and liabilities of the bank under liquidation are to
be paid in accordance with the rules on concurrence and preference of credit under
the Civil Code. With reference to the other real and personal property of the debtor,
sometimes referred to as free property, the taxes and assessments due the
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National Government, other than those in Articles 2241(1) and 2242(1) of the Civil
Code, such as the corporate income tax, will come only in ninth place in the order of
preference. If the BIRs contention that a tax clearance be secured first before the
project of distribution of the assets of a bank under liquidation may be approved,
then the tax liabilities will be given absolute preference in all instances, including
those that do not fall under Articles 2241(1) and 2242(1) of the Civil Code. Philippine Deposit Insurance Corporation vs. Bureau Of Internal Revenue,
G.R. No. 172892, June 13, 2013
INTELLECTUAL PROPERTY LAW
The conviction of Gemma for trademark infringement under Section 155 of Republic
Act No. 8293, as the counterfeit goods seized were not only found in her possession
and control, but also in the building registered under her business. The counterfeit
cigarettes seized from Gemmas possession were intended to confuse and deceive
the public as to the origin of the cigarettes intended to be sold. - Gemma
Ong a.k.a. Maria Teresa Gemma Catacutan vs. People of the Philippines,
G.R. No. 169440, November 23, 2011
NEGOTIABLE INSTRUMENTS LAW
Banks are engaged in a business impressed with public interest, and it is their duty
to protect in return their many clients and depositors who transact business with
them. - Bank Of America NT & SA vs. Philippine Racing Club, G.R. No.
150228, July 30, 2009

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