G.R. Nos.
116124-25 November 22, 2000 It was used for the purchase of a house and lot located at No. 12
BIBIANO O. REYNOSO, IV, petitioner,
vs.
HON. COURT OF APPEALS and GENERAL CREDIT
CORPORATION, respondents.
FACTS: The Commercial Credit Corporation (hereinafter, "CCC"), a
financing and investment firm, decided to organize franchise
companies in different parts of the country, wherein it shall hold
thirty percent (30%) equity. Employees of the CCC were designated as
resident managers of the franchise companies. Petitioner Bibiano O.
Reynoso, IV was designated as the resident manager of the franchise
company in Quezon City, known as the Commercial Credit
Corporation of Quezon City (hereinafter, "CCC-QC").
CCC-QC entered into an exclusive management contract with CCC
whereby the latter was granted the management and full control of
the business activities of the former. Under the contract, CCC-QC
shall sell, discount and/or assign its receivables to CCC.
Subsequently, however, this discounting arrangement was
discontinued pursuant to the so-called "DOSRI Rule", prohibiting the
lending of funds by corporations to its directors, officers,
stockholders and other persons with related interests therein.CCC
decided to form CCC Equity Corporation, (hereinafter, "CCC-Equity"),
a wholly-owned subsidiary, to which CCC transferred its thirty (30%)
percent equity in CCC-QC, together with two seats in the latter’s
Board of Directors.
Several officials of Commercial Credit Corporation, including
petitioner Reynoso, became employees of CCC-Equity. While
petitioner continued to be the Resident Manager of CCC-QC, he drew
his salaries and allowances from CCC-Equity. Furthermore, although
an employee of CCC-Equity, petitioner, as well as all employees of
CCC-QC, became qualified members of the Commercial Credit
Corporation Employees Pension Plan.
Petitioner, in order to boost the business activities of CCC-QC,
deposited his personal funds in the company. In return, CCC-QC
issued to him its interest-bearing promissory notes.
A complaint for sum of money with preliminary attachmentwas
instituted in the then Court of First Instance of Rizal by CCC-QC
against petitioner, who had in the meantime been dismissed from his
employment by CCC-Equity. The complaint was subsequently
amended in order to include HidelitaNuval, petitioner’s wife, as a
party defendant.2 The complaint alleged that petitioner embezzled the
funds of CCC-QC
Macopa Street, Valle Verde I, Pasig City. The property was mortgaged
to CCC, and was later foreclosed. Petitioner denied having unlawfully
used funds of CCC-QC and asserted that the sum of P1,300,593.11
represented his money placements in CCC-QC, as shown by twenty-
three (23) checks which he issued to the said company.
the trial court rendered its decision wherein it finds the complaint
without merit. Accordingly, said complaint was dismissed. By reason
of said complaint, defendant BibianoReynoso IV suffered degradation,
humiliation and mental anguish.
Both parties appealed to the then Intermediate Appellate Court. The
appeal of Commercial Credit Corporation of Quezon City was
dismissed for failure to pay docket fees. Petitioner, on the other hand,
withdrew his appeal.
Meanwhile, in 1983, CCC became known as the General Credit
Corporation.
Petitioner insisted that General Credit Corporation is just the new
name of Commercial Credit Corporation; hence, General Credit
Corporation and Commercial Credit Corporation should be treated as
one and the same entity.Regional Trial Court of Quezon City denied
the Omnibus Motion.
General Credit Corporation instituted a complaint before the Regional
Trial Court of Pasig against BibianoReynoso IV and Edgardo C.
Tanangco, in his capacity as Deputy Sheriff of Quezon
City,14 docketed as Civil Case No. 61777, praying that the levy on its
parcel of land located in Pasig, Metro Manila and covered by Transfer
Certificate of Title No. 29940 be declared null and void, and that
defendant sheriff be enjoined from consolidating ownership over the
land and from further levying on other properties of General Credit
Corporation to answer for any liability under the decision in Civil
Case No. Q-30583.
ISSUE:whether or not the judgment in favor of petitioner may be
executed against respondent General Credit Corporation
(EXTRA NOTES FOR RECIT IN CONNECTION WITH THE ISSUE: The
latter contends that it is a corporation separate and distinct from
CCC-QC and, therefore, its properties may not be levied upon to
satisfy the monetary judgment in favor of petitioner. In short,
respondent raises corporate fiction as its defense. Hence, we are
necessarily called upon to apply the doctrine of piercing the veil of
corporate entity in order to determine if General Credit Corporation,
formerly CCC, may be held liable for the obligations of CCC-QC.)
HELD:The petition is impressed with merit.
A corporation is an artificial being created by operation of law, having
the right of succession and the powers, attributes, and properties
expressly authorized by law or incident to its existence. 17 It is an
artificial being invested by law with a personality separate and
distinct from those of the persons composing it as well as from that of
any other legal entity to which it may be related. 18 It was evolved to
make possible the aggregation and assembling of huge amounts of
capital upon which big business depends. It also has the advantage
of non-dependence on the lives of those who compose it even as it
enjoys certain rights and conducts activities of natural persons.
Precisely because the corporation is such a prevalent and dominating
factor in the business life of the country, the law has to look carefully
into the exercise of powers by these artificial persons it has created.
Any piercing of the corporate veil has to be done with caution.
However, the Court will not hesitate to use its supervisory and
adjudicative powers where the corporate fiction is used as an unfair
device to achieve an inequitable result, defraud creditors, evade
contracts and obligations, or to shield it from the effects of a court
decision. The corporate fiction has to be disregarded when necessary
in the interest of justice.
It is obvious that the use by CCC-QC of the same name of
Commercial Credit Corporation was intended to publicly identify it as
a component of the CCC group of companies engaged in one and the
same business, i.e., investment and financing. Aside from CCC-
Quezon City, other franchise companies were organized such as CCC-
North Manila and CCC-Cagayan Valley. The organization of
subsidiary corporations as what was done here is usually resorted to
for the aggrupation of capital, the ability to cover more territory and
population, the decentralization of activities best decentralized, and
the securing of other legitimate advantages. But when the mother
corporation and its subsidiary cease to act in good faith and honest
business judgment, when the corporate device is used by the parent
to avoid its liability for legitimate obligations of the subsidiary, and
when the corporate fiction is used to perpetrate fraud or promote
injustice, the law steps in to remedy the problem. When that
happens, the corporate character is not necessarily abrogated. It
continues for legitimate objectives. However, it is pierced in order to
remedy injustice, such as that inflicted in this case.
The ends of justice are not served if further litigation is encouraged
when the issue is determinable based on the records.If the corporate
fiction is sustained, it becomes a handy deception to avoid a
judgment debt and work an injustice. The decision raised to us for
review is an invitation to multiplicity of litigation. As we stated
in Islamic Directorate vs. Court of Appeals,30 the ends of justice are
not served if further litigation is encouraged when the issue is
determinable based on the records.
A court judgment becomes useless and ineffective if the employer, in
this case CCC as a mother corporation, is placed beyond the legal
reach of the judgment creditor who, after protracted litigation, has
been found entitled to positive relief. Courts have been organized to
put an end to controversy. This purpose should not be negated by an
inapplicable and wrong use of the fiction of the corporate veil.
Tayag vs. Benguet Consolidated, Inc.
on 7:32 AM in Civil Law, Private International Law
0
G.R. No. L-23145, Nov. 29, 1968
o PRIVATE INTERNATIONAL LAW: Situs of Shares of Stock: domicile of
the corporation
o SUCCESSION: Ancillary Administration: The ancillary administration
is proper, whenever a person dies, leaving in a country other than
that of his last domicile, property to be administered in the nature of
assets of the deceased liable for his individual debts or to be
distributed among his heirs.
o SUCCESSION: Probate: Probate court has authority to issue the
order enforcing the ancillary administrator’s right to the stock
certificates when the actual situs of the shares of stocks is in the
Philippines.
FACTS:
Idonah Slade Perkins, an American citizen who died in New York
City, left among others, two stock certificates issued by Benguet
Consolidated, a corporation domiciled in the Philippines. As ancillary
administrator of Perkins’ estate in the Philippines, Tayag now wants
to take possession of these stock certificates but County Trust
Company of New York, the domiciliary administrator, refused to part
with them. Thus, the probate court of the Philippines was forced to
issue an order declaring the stock certificates as lost and ordering
Benguet Consolidated to issue new stock certificates representing
Perkins’ shares. Benguet Consolidated appealed the order, arguing
that the stock certificates are not lost as they are in existence and
currently in the possession of County Trust Company of New York.
ISSUE: Whether or not the order of the lower court is proper
HELD:
The appeal lacks merit.
Tayag, as ancillary administrator, has the power to gain control and
possession of all assets of the decedent within the jurisdiction of the
Philippines
It is to be noted that the scope of the power of the ancillary
administrator was, in an earlier case, set forth by Justice Malcolm.
Thus: "It is often necessary to have more than one administration of
an estate. When a person dies intestate owning property in the
country of his domicile as well as in a foreign country, administration
is had in both countries. That which is granted in the jurisdiction of
decedent's last domicile is termed the principal administration, while
any other administration is termed the ancillary administration. The
reason for the latter is because a grant of administration does not ex
proprio vigore have any effect beyond the limits of the country in
which it is granted. Hence, an administrator appointed in a foreign
state has no authority in the [Philippines]. The ancillary
administration is proper, whenever a person dies, leaving in a
country other than that of his last domicile, property to be
administered in the nature of assets of the deceased liable for his
individual debts or to be distributed among his heirs."
Probate court has authority to issue the order enforcing the ancillary
administrator’s right to the stock certificates when the actual situs of
the shares of stocks is in the Philippines.
It would follow then that the authority of the probate court to require
that ancillary administrator's right to "the stock certificates covering
the 33,002 shares ... standing in her name in the books of [appellant]
Benguet Consolidated, Inc...." be respected is equally beyond
question. For appellant is a Philippine corporation owing full
allegiance and subject to the unrestricted jurisdiction of local courts.
Its shares of stock cannot therefore be considered in any wise as
immune from lawful court orders.
Our holding in Wells Fargo Bank and Union v. Collector of Internal
Revenue finds application. "In the instant case, the actual situs of the
shares of stock is in the Philippines, the corporation being domiciled
[here]." To the force of the above undeniable proposition, not even
appellant is insensible. It does not dispute it. Nor could it
successfully do so even if it were so minded.
NDC VS PHILIPPINE VETERANS BANK (192 SCRA 257)
National Development Corporation vs Philippine Veterans Bank
192 SCRA 257 [GR No. 84132-33 December 10, 1990]
Facts: The particular enactment in question is Presidential Decree
No. 1717, which ordered the rehabilitation of the Agrix Group of
Companies to be administered mainly by the National Development
Company. The law outlined the procedure for filling claims against
the Agrix Companies and created a claims committee to process these
claims. Especially relevant to this case, and noted at the outset, is
section 4(1) thereof providing that “all mortgages and other liens
presently attaching to any of the assets of the dissolved corporations
are hereby extinguished.” Earlier, the Agrix Marketing Inc. had
executed in favor of private respondent Philippine Veterans Bank a
real estate mortgage dated July 7, 1978 over three parcels of land
situated in Los Baños, Laguna. During the existence of the mortgage,
Agrix went bankrupt. It was the expressed purpose of salvaging this
and the other Agrix companies that the aforementioned decree was
issued by President Marcos. A claim for the payment of its loan credit
was filed by PNB against herein petitioner, however the latter alleged
and invoked that the same was extinguished by PD 1717.
Issue: Whether or not Philippine Veterans Bank as creditor of Agrix is
still entitled for payment without prejudice to PD 1717.
Held: Yes. A mortgage lien is a property right derived from contract
and so comes under the protection of Bill of rights so do interests on
loans, as well s penalties and charges, which are also vested rights
once they accrue. Private property cannot simply be taken by law
from one person and given to another without just compensation and
any known public purpose. This is plain arbitrariness and is not
permitted under the constitution.
The court also feels that the decree impairs the obligation of the
contract between Agrix and the private respondent without
justification. While it is true that the police power is superior to the
impairment clause, the principle will apply only where the contract is
so related to the public welfare that it will be considered congenitally
susceptible to change by the legislature in the interest of greater
number.
Our finding in sum, is that PD 1717 is an invalid exercise of the
police power, not being in conformity with the traditional
requirements of a lawful subject and a lawful method. The extinction
of the mortgage and other liens and of the interest and other charges
pertaining to the legitimate creditors of Agrix constitutes taking
without due process of law, and this is compounded by the reduction
of the secured creditors to the category of unsecured creditors in
violation of the equal protection clause. Moreover, the new
corporation being neither owned nor controlled by the government,
should have been created only by general and not special law. And in
so far as the decree also interferes with purely private agreements
without any demonstrated connection with the public interest, there
is likewise an impairment of the obligation of the contract.
PRIVATE INTERNATIONAL LAW: Inconvenient Forumcribd
G.R. No. 120077 October 13, 2000
THE MANILA HOTEL CORP. AND MANILA HOTEL INTL.
LTD., petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION,
ARBITER CEFERINA J. DIOSANA AND MARCELO G.
SANTOS, respondents.
FACTS:
Marcelo G. Santos was employed as a printer by the Palace Hotel,
Beijing, China whose personnel were trained by the MHCL. MHC is
the “incorporator” of MHCL, owning 50% of its capital stock. MHC
was organized under the laws of the Philippines. On the other hand,
MHICL was created under the laws of Hong Kong.
Due to a retrenchment and “after the unfortunate happenings in
China” (the Tiannamen Square incidents) that has affected the
company business, the printshop of the hotel where Santos is
assigned was closed. For this, Santos was released from employment.
He was paid all benefits due to him and he was repatriated to the
Philippines.
Santos filed a complaint for illegal dismissal with the Arbitration
Branch, NCR, NLRC, praying for damages. The complaint named
MHC, MHICL, the Palace Hotel and Mr. Shmidt, the General Manager
of the Palace Hotel, as respondents. The Palace Hotel and Mr.
Gerhard Shmidt were not served with summons and neither
participated in the proceedings before the Labor Arbiter. NLRC ruled
in favor of Santos. MHC and MHCL appealed to the NLRC arguing
that the POEA, not the NLRC had jurisdiction over the case. NLRC
dismissed the case and referred the case to the POEA. Santos filed a
motion to reconsider, stating that he is not an “overseas worker”,
thus POEA does not have jurisdiction. NLRC reversed itself, ruling in
favor of Santos. It then ordered the petitioners to pay Santos his
unpaid salaries and damages.
ISSUE: Whether or not NLRC was an inconvenient forum.
RULING: YES. The NLRC was a seriously inconvenient forum.
The Palace Hotel and MHICL are foreign corporations. Santos was
hired by the Palace Hotel, Beijing without the intervention of the
POEA or any authorized recruitment agency of the government.
Under the rule of forum non conveniens, a Philippine court or
agency may assume jurisdiction over the case if it chooses to do
so provided: (1) that the Philippine court is one to which the
parties may conveniently resort to; (2) that the Philippine court
is in a position to make an intelligent decision as to the law and
the facts; and (3) that the Philippine court has or is likely to
have power to enforce its decision. The conditions are unavailing
in the case at bar.
The SC states that NLRC is not a convenient forum given that all
the incidents of the case — from the time of recruitment, to
employment to dismissal occurred outside the Philippines. The
inconvenience is compounded by the fact that the proper
defendants, the Palace Hotel and MHICL are not nationals of the
Philippines. Neither are they “doing business in the Philippines.”
Likewise, the main witnesses, Mr. Shmidt and Mr. Henk, the
Hotel manager, are non-residents of the Philippines.
QUERIES:
1. Will Philippine Laws apply in this case?
NO. The law governing the employment contract as such was
perfected in foreign soil. This calls to for the application of the
principle of lex loci contractus (the law of the place where the
contract was made). The employment contract was not
perfected in the Philippines. Santos signified his acceptance
by writing a letter while he was still in the Republic of Oman.
The letter was sent to the Palace Hotel in the China.
2. Does NLRC have the power to determine the facts of the case?
NO. All the acts complained of took place in Beijing. The NLRC
was not in a position to determine whether the Tiannamen
 Square incident truly adversely affected operations of the
Palace Hotel as to justify respondent Santos’ retrenchment.
3. Does the Principle of effectiveness apply? Can the case be
decided in the Philippines through the NLRC?
NO. Even assuming that a proper decision could be reached
by the NLRC, such would not have any binding effect against
the employer, the Palace Hotel. The Palace Hotel is a
corporation incorporated under the laws of China and was not
even served with summons. Jurisdiction over its person was
not acquired.
This is not to say that Philippine courts and agencies have no
power to solve controversies involving foreign employers.
Neither are we saying that we do not have power over an
employment contract executed in a foreign country. If Santos
were an “overseas contract worker”, a Philippine forum,
specifically the POEA, not the NLRC, would protect him. He is
not an “overseas contract worker” a fact which he admits with
conviction.
Issue:
Whether or not petitioner corporation, who has already ceased
its operation, may claim for moral damages.
Ruling: NO.
Herein appellant’s claim for moral damages, however, seems
to have no legal or factual basis. Obviously, an artificial
person like herein appellant corporation cannot experience
physical sufferings, mental anguish, fright, serious anxiety,
wounded feelings, moral shock or social humiliation which are
basis of moral damages. A corporation may have a good
reputation which, if besmirched, may also be a ground for the
award of moral damages. The same cannot be considered
under the facts of this case, however, not only because it is
admitted that herein appellant had already ceased in its
business operation at the time of the foreclosure sale of the
chattels, but also for the reason that whatever adverse effects
of the foreclosure sale of the chattels could have upon its
reputation or business standing would undoubtedly be the
same whether the sale was conducted at Jose Panganiban,
Camarines Norte, or in Manila which is the place agreed upon
by the parties in the mortgage contract.

Even assuming that the NLRC was the proper forum, even on
the merits, the NLRC’s decision cannot be sustained.

Mambulao Lumber Company v. PNB (G.R. No. L-22973)

Date: June 6, 2016
Facts:
Petitioner Mambulao Lumber applied for an industrial loan
with herein respondent PNB and was approved with its real
estate, machinery and equipments as collateral. PNB released
the approved loan but petitioner failed to pay and was later
discovered to have already stopped in its operation. PNB then
moved for the foreclosure and sale of the mortgaged
properties. The properties were sold and petitioner sent a
bank draft to PNB to settle the balance of the obligation. PNB
however alleges that a remaining balance stands and a
foreclosure sale would still be held unless petitioner remits
said amount. The foreclosure sale proceeded and petitioner’s
properties were taken out of its compound. Petitioner filed
actions before the court and claims among others, moral
damages.