3.

MARUBENI CORPORATION v. FELIX LIRAG, GR No. 130998, 2001-08-10

Facts:
Petitioner Marubeni... is a foreign corporation organized and existing under the laws of
Japan
It was doing business in the Philippines through its duly licensed, wholly owned
subsidiary, Marubeni Philippines Corporation. Petitioners Ryoichi
Tanaka, Ryohei Kimura and Shoichi One were officers of Marubeni assigned to its
Philippine branch.
On January 27, 1989, respondent
Lirag filed with the Regional Trial Court... a complaint... for specific performance and
damages claiming that petitioners owed him the sum of P6,000,000.00 representing
commission pursuant to an oral consultancy... agreement with Marubeni.
Lirag claimed that on February 2, 1987, petitioner Ryohei Kimura hired his consultancy
group for the purpose of obtaining government contracts of various projects.
Petitioners promised to pay him six percent (6%) consultancy fee... based on the total
costs of the projects obtained.
The consultancy agreement was not reduced into writing because of the mutual trust
between Marubeni and the Lirag family.
Their close business and personal relationship dates back to 1960, when respondent's
family was engaged in the textile fabric... manufacturing business, in which Marubeni
supplied the needed machinery, equipment, spare parts and raw materials.
In compliance with the agreement, respondent Lirag made representations with various
government officials, arranged for meetings and conferences, relayed pertinent
information as well as submitted feasibility studies and project proposals, including
pertinent documents required... by petitioners.
One of the projects handled by respondent Lirag, the Bureau of Post project, amounting
to P100,000,000.00 was awarded to the "Marubeni-Sanritsu tandem."
Despite respondent's repeated formal verbal demands for payment of the agreed
consultancy fee,... petitioners did not pay. In response to the first demand letter,
petitioners promised to reply within fifteen (15) days, but they did not do so.
Pursuant to the consultancy agreement, respondent claimed a commission of six percent
(6%) of the total contract price, or a total of P6,000,000.00, or in the alternative, that he
be paid the same amount by way of damages or as the reasonable value of the services
he rendered to... petitioners, and further claimed twenty percent (20%) of the amount
recoverable as attorney's fees and the costs of suit.
petitioners denied the consultancy agreement.
Petitioner Ryohei Kimura did not have the authority to enter into such agreement in behalf
of Marubeni. Only Mr. Morihiko Maruyama, the general manager, upon issuance of a
special power of attorney by the principal... office in Tokyo, Japan, could enter into any
contract in behalf of the corporation. Mr. Maruyama did not discuss with respondent Lirag
any of the matters alleged in the complaint, nor agreed to the payment of commission.
Thus, petitioners moved for the dismissal of the complaint.
During the pre-trial conferences held on September 18 and October 16, 1989 and on
January 24, March 15 and May 17, 1990, no amicable settlement was reached. Trial on
the merits ensued.
On April 29, 1993, the trial court promulgated a decision and ruled that respondent is
entitled to a commission. Respondent was led to believe that there existed an oral
consultancy agreement. Hence, he performed his part of the agreement and helped
petitioners get the project.
On May 26, 1993, petitioners interposed an appeal from the decision to the Court of
Appeals.
After due proceedings, on October 9, 1997, the Court of Appeals promulgated a decision
affirming the decision of the trial court. The Court of Appeals ruled that preponderance of
evidence favored the existence of a consultancy agreement between the parties. It upheld
the factual... findings of the trial court
Issues:
whether or not respondent is entitled to receive a commission if there was, in fact, a
consultancy... agreement
Ruling:
We find the appeal meritorious.
An assiduous scrutiny of the testimonial and documentary evidence extant leads us to
the conclusion that the evidence could not support a solid conclusion that a consultancy
agreement, oral or written, was agreed between petitioners and respondent.
In civil cases, he who alleges a fact has the burden of proving it; a mere allegation is not
evidence.
He must establish his cause by a preponderance of evidence,...which respondent failed
to establish in the instant case.
Assuming for the sake of argument that an oral consultancy agreement has been
perfected between the parties, respondent Lirag could not still claim fees on the project
that has not been awarded to Marubeni.
Respondent tried to justify his commission of roughly about P6,000,000.00 in the guise
that Marubeni and Sanritsu are sister corporations, thereby implying the need to pierce
the veil of corporate fiction. Respondent claimed that Marubeni as the supplier and real
contractor of... the project hired and sub-contracted the project to Sanritsu.
To disregard the separate juridical personality of a corporation, the wrongdoing must be
clearly and convincingly established. It cannot be presumed. The separate personality of
the corporation may be disregarded only when the corporation is used as a cloak or cover
for fraud or... illegality, or to work injustice, or where necessary for the protection of
creditors.
Any agreement entered into because of the actual or supposed influence which the party
has, engaging him to influence executive officials in the discharge of their duties, which
contemplates the use of personal influence and solicitation rather than an appeal to the
judgment of... the official on the merits of the object sought is contrary to public policy.
Consequently, the agreement, assuming that the parties agreed to the consultancy, is
null and void as against public policy.
Therefore, it is... unenforceable before a court of justice.
4. 32
LIM
VS.
COURT OF APPEALS
G.R. No. 124715
FACTS OF THE CASE
Private respondents Auto Truck Corporation, Alliance Marketing Corporation, Speed
Distributing, Inc., Active Distributing, Inc. and Action Company are corporations formed,
organized and existing under Philippine laws and which owned real properties covered
under the Torrens system.
On 11 June 1994, Pastor Y. Lim died intestate. Herein petitioner Rufina Lim, as surviving
spouse and duly represented by her nephew George Luy, filed a joint petition for
the administration of the estate of Pastor Y. Lim before the Regional Trial Court of
Quezon City.
Private respondent corporations, whose properties were included in the inventory
of the estate of Pastor Y. Lim, then filed a motion for the lifting oflis pendens and
motion for exclusion of certain properties from the estate of the decedent.Rufina
alleged that the assets of these corporations were owned wholly by Pastor; that
these corporations themselves are owned by Pastor and they are mere dummies
of Pastor. The corporations filed a motion for exclusion from the estate. They presented
proof (Torrens Titles) showing that the assets of the corporations are in their respective
names and titles. The probate court denied their motion. The Court of Appeals
reversed the decision of the probate court.
ISSUE
Whether the corporations and/or their assets should be included in the
Inventory of the estate.
RULING
No.
As regards the assets, the corporations were able to present their respective
Torrens Titles over the disputed assets. It is true that a probate court may pass upon
the question ownership albeit in a provisional manner but still, a Torrens Title cannot be
attacked collaterally in a probate proceeding, it must be attacked directly in a
separate proceeding.
As regards the corporations, to include them in theinventory
is tantamount to the piercing of the veil of corporate fiction because the probate
court effectively adopted the theory of Rufina. This cannot be done. Firstly, the probate
court is sitting in a limited capacity. Secondly, Rufina was not able to present sufficient
evidence that indeed the corporations are mere conduits of Pastor. Mere ownership
by a single stockholder or by another corporation of all or nearly all of the capital
stock of a corporation is not of itself a sufficient reason for disregarding the fiction
of separate corporate personalities. The veil can’t be pierced without any showing that
indeed the corporation is being used merely as a dummy. To disregard the separate
juridical personality of a corporation, the wrong doing must be clearly and
convincingly established. It cannot be presumed.

5. TITLE:
FRANCISCO V. DEL ROSARIO vs. NATIONAL LABOR RELATIONSCOMMISSION;
G.R. No. 85416. July 24, 1990
CASE NO.
12
FACTS:
In POEA Case No. 85-06-0394, the POEA promulgated a decision dismissingthe
complaint for money claims for lack of merit. The decision was appealed tothe NLRC,
which reversed the POEA decision and ordered Philsa Constructionand Trading Co., Inc.,
the recruiter and Arieb Enterprises, the foreign employerto jointly and severally pay
private respondent their salary differentials andvacation leave benefits. A writ of execution
was issued by the POEA but it was returned unsatisfied asPhilsa was no longer operating
and was financially incapable of satisfying the judgment. Private respondent moved
for the issuance of an alias writ againstthe officers of Philsa. This motion was opposed by
the officers, led bypetitioner, the president and general manager of the
corporation.Petitioner appealed to the NLRC. On September 23, 1988, the
NLRCdismissed the appeal on the theory that the corporate personality of Philsashould
be disregarded. According to the NLRC, Philsa Construction & TradingCo., Inc. and
Philsa International Placement & Services Corp are one and thesame because both
corporations has the same set of directors and officers.Petitioner's motion for
reconsideration was denied. Thus, this petition wasfiled, alleging that the NLRC gravely
abused its discretion.
ISSUE:
Whether the action of the NLRC affirming the issuance of an alias writ ofexecution against
petitioner, on the theory that the corporate personality ofPhilsa should be disregarded.
RULING:
YES.Under the law a corporation is bestowed juridical personality, separate anddistinct
from its stockholders. But when the juridical personality of thecorporation is used to
defeat public convenience, justify wrong, protect fraud ordefend crime, the corporation
shall be considered as a mere association ofpersons and its responsible officers and/or
stockholders shall be heldindividually liable. For the same reasons, a corporation shall be
liable for theobligations of a stockholder, or a corporation and its successor-in-interest
shallbe considered as one and the liability of the former shall attach to the latter.But for
the separate juridical personality of a corporation to be disregarded, thewrongdoing must
be clearly and convincingly established. It cannot bepresumed. Thus, at the time Philsa
allowed its license to lapse in 1985 andeven at the time it was delisted in 1986, there was
yet no judgment in favor ofprivate respondent. An intent to evade payment of his claims
cannot thereforebe implied from the expiration of Philsa's license and its delisting.
Likewise,substantial identity of the incorporators of the two corporations does
notnecessarily imply fraud.In this case, not only has there been a failure to establish
fraud, but it has alsonot been shown that petitioner is the corporate officer responsible for
privaterespondent's predicament. It must be emphasized that the claim fordifferentials
and benefits was actually directed against the foreign employer.Philsa became liable only
because of its undertaking to be jointly and severallybound with the foreign employer, an
undertaking required by the rules of thePOEA, together with the filing of cash and surety
bonds, in order to ensure thatoverseas workers shall find satisfaction for awards in their
favor.WHEREFORE, the petition is GRANTED and the decision and resolution ofthe
NLRC, dated September 23, 1988 and October 21, 1988, respectively, inPOEA Case No.
85-06-0394 are SET ASIDE.

6.
CLOSE CORPORATION
Manuel R. Dulay Enterprises vs. Court of Appeals
[GR 91889, 27 August 1993]Second Division, Nocon (J): 3 concur, 1 took no part
Facts:
Manuel R.Dulay Enterprises, Inc., a domestic corporation with the following as
members of its Board ofDirectors: Manuel R. Dulay with 19,960 shares and designated
as president, treasurer and general manager;Atty. Virgilio E. Dulay with 10 shares and
designated as vice-president; Linda E. Dulay with 10 shares; CeliaDulay-Mendoza with
10 shares; and Atty. Plaridel C. Jose with 10 shares and designated as secretary,
owned a property covered by TCT 17880 4 and known as Dulay Apartment consisting
of 16 apartment units on a 689square meter lot, more or less, located at Seventh Street
(now Buendia Extension) and F.B. Harrison Street,Pasay City. The corporation through
its president, Manuel Dulay, obtained various loans for the construction ofits hotel
project, Dulay Continental Hotel (now Frederick Hotel). It even had to borrow money
from VirgilioDulay to be able to continue the hotel project. As a result of said loan,
Virgilio Dulay occupied one of the unitapartments of the subject property since 1973
while at the same time managing the Dulay Apartment as hisshareholdings in the
corporation was subsequently increased by his father. On 23 December 1976,
ManuelDulay by virtue of Board Resolution 18 of the corporation sold the subject
property to spouses Maria Theresaand Castrense Veloso in the amount of P300,000.00
as evidenced by the Deed of Absolute Sale. Thereafter,TCT 17880 was cancelled and
TCT 23225 was issued to Maria Theresa Veloso. Subsequently, Manuel Dulayand the
spouses Veloso executed a Memorandum to the Deed of Absolute Sale of 23
December 1976 dated 9December 1977 giving Manuel Dulay within 2 years or until 9
December 1979 to repurchase the
subject property for P200,000.00 which was, however, not annotated either in TCT 1788
0 or TCT 23225. On 24December 1976, Maria Veloso, without the knowledge of Manuel
Dulay, mortgaged the subject property toManuel A. Torres for a loan of P250,000.00
which was duly annotated as Entry 68139 in TCT 23225. Upon thefailure of Maria
Veloso to pay Torres, the subject property was sold on 5 April 1978 to Torres as the
highest bidder in an extrajudicial foreclosure sale as evidenced by the Certificate of
Sheriff's Sale issued on 20 April1978. On 20 July 1978, Maria Veloso executed a Deed
of Absolute Assignment of the Right to Redeem in favorof Manuel Dulay assigning her
right to repurchase the subject property from Torres as a result of theextrajudicial sale.
As neither Maria Veloso nor her assignee Manuel Dulay was able to redeem the
subject property within the one year statutory period for redemption, Torres filed an Affid
avit of Consolidation ofOwnership 13 with the Registry of Deeds of Pasay City and TCT
24799 was subsequently issued to Torres on23 April 1979. On 1 October 1979, Torres
filed a petition for the issuance of a writ of possession against spousesVeloso and
Manuel Dulay in LRC Case 1742-P. However, when Virgilio Dulay appeared in court to
intervenein said case alleging that Manuel Dulay was never authorized by
the corporation to sell or mortgage the subject property, the trial court ordered Torres to
implead the corporation as an indispensable party but the latter movedfor the dismissal
of his petition which was granted in an Order dated 8 April 1980. On 20 June 1980,
Torres andEdgardo Pabalan, real estate administrator of Torres, filed an action against
the corporation, Virgilio Dulay and Nepomuceno Redovan, a tenant of Dulay
Apartment Unit No. 8-A for the recovery of possession, sum of moneyand damages with
preliminary injunction in Civil Case 8198-P with the then Court of First Instance of
Rizal.On 21 July 1980, the corporation filed an action against spouses Veloso and
Torres for the cancellation of theCertificate of Sheriff's Sale and TCT 24799 in Civil
Case 8278-P with the then Court of First Instance of Rizal.On 29 January 1981,
Pabalan and Torres filed an action against spouses Florentino and Elvira Manalastas,
atenant of Dulay Apartment Unit No. 7-B, with the corporation as intervenor for
ejectment in Civil Case 38-81with the Metropolitan Trial Court of Pasay City which
rendered a decision on 25 April 1985, in favor of Pabalan,et al., ordering the spouses
Manalastas and all persons claiming possession under them to vacate the
premises;and to pay the rents in the sum of P500.00 a month from May 1979 until they
shall have vacated the premiseswith interest at the legal rate; and to pay attorney's fees
in the sum of P2,000.00 and P1,000.00 as other expensesof litigation and for them to
pay the costs of the suit. Thereafter or on 17 May 1985, the corporation
and VirgilioDulay filed an action against the presiding judge of the Metropolitan Trial
Court of Pasay City, Pabalan andTorres for the annulment of said decision with the
Regional Trial Court of Pasay in Civil Case 2880-P.Thereafter, the 3 cases were jointly
tried and the trial court rendered a decision in favor of Pabalan and
Torres. Not satisfied with said decision, the corporation, et al. appealed to the Court of A
ppeals which rendered adecision on 23 October 1989, affirming the trial court decision.
On 8 November 1989, the corporation, et al.

106
filed a Motion for Reconsideration which was denied on 26 January 1990. The
corporation, et al. filed the petition for review on certiorari. During the pendency of the
petition, Torres died on 3 April 1991 as shown inhis death certificate and named Torres-
Pabalan Realty & Development Corporation as his heir in his holographicwill dated 31
October 1986.
Issue:
Whether the sale of the subject property between spouses Veloso and Manuel Dulay
has no binding effecton the corporation as Board Resolution 18 which authorized the
sale of the subject property was resolvedwithout the approval of all the members of the
board of directors and said Board Resolution was prepared by a person not designated
by the corporation to be its secretary.
Held:
Section 101 of the Corporation Code of the Philippines provides that "When board
meeting is unnecessaryor improperly held. Unless the by-laws provide otherwise, any
action by the directors of a close corporationwithout a meeting shall nevertheless be
deemed valid if: (1) Before or after such action is taken, written consentthereto is signed
by all the directors; or (2) All the stockholders have actual or implied knowledge of the
actionand make no prompt objection thereto in writing; or (3) The directors are
accustomed to take informal actionwith the express or implied acquiesce of all the
stockholders; or (4) All the directors have express or impliedknowledge of the action in
question and none of them makes prompt objection thereto in writing. If a
directors'meeting is held without proper call or notice, an action taken therein within the
corporate powers is deemedratified by a director who failed to attend, unless he
promptly files his written objection with the secretary ofthe corporation after having
knowledge thereof." Herein, the corporation is classified as a close corporation
andconsequently a board resolution authorizing the sale or mortgage of the subject
property is not necessary to bindthe corporation for the action of its president. At any
rate, a corporate action taken at a board meeting without proper call or notice in a close
corporation is deemed ratified by the absent director unless the latter promptlyfiles his
written objection with the secretary of the corporation after having knowledge of the
meeting which,in this case, Virgilio Dulay failed to do. The corporation's claim that the
sale of the subject property by its president, Manuel Dulay, to spouses Veloso is
null and void as the alleged Board Resolution 18 was passedwithout the knowledge and
consent of the other members of the board of directors cannot be sustained. VirgilioE.
Dulay's protestations of complete innocence to the effect that he never participated nor
was even aware ofany meeting or resolution authorizing the mortgage or sale of the
subject premises is difficult to believe. On thecontrary, he is very much privy to the
transactions involved. To begin with, he is an incorporator and one of the board
of directors designated at the time of the organization of Manuel R. Dulay Enterprises,
Inc.
In ordinary parlance, the said entity is loosely referred to as a "family corporation." The
nomenclature, if imprecise,however, fairly reflects the cohesiveness of a group and the
parochial instincts of the individual members ofsuch an aggrupation of which Manuel R.
Dulay Enterprises, Inc. is typical: four-fifths of its incorporators beingclose relatives
namely, 3 children and their father whose name identifies their corporation. Besides, the
fact thatVirgilio Dulay on 24 June 1975 executed an affidavit that he was a signatory
witness to the execution of the post-dated Deed of Absolute Sale of the subject property
in favor of Torres indicates that he was aware of thetransaction executed between his
father and Torres and had, therefore, adequate knowledge about the sale ofthe subject
property to Torres. Consequently, the corporation is liable for the act of Manuel Dulay
and the sale of
9. G.R. No. L-41337 June 30, 1988 TAN BOON BEE & CO., INC., petitioner, vs. THE
HONORABLE HILARION U. JARENCIO, PRESIDING JUDGE OF BRANCH XVIII of the
Court of First Instance of Manila, GRAPHIC PUBLISHING, INC., and PHILIPPINE
AMERICAN CAN DRUG COMPANY, respondents. PARAS, J.: Petitioner herein, doing
business under the name and style of Anchor Supply Co., sold on credit to herein private
respondent Graphic Publishing, Inc. (GRAPHIC for short) paper products. For failure of
GRAPHIC to pay any installment, as agagreed on the contract of sale, petitioner filed with
the then Court of First Instance of Manila for sum of Money. The trial court ordered
GRAPHIC to pay the petitioner. On motion of petitioner, a writ of execution was issued
and the executing sheriff levied upon one (1) unit printing machine Identified as "Original
Heidelberg Cylinder Press" Type H 222, NR 78048, found in the premises of GRAPHIC
but herein private respondent, Philippine American Drug Company (PADCO for short)
had informed the sheriff that the printing machine is its property and not that of GRAPHIC
however the sheriff proceeded with the scheduled auction sale, sold the property to the
petitioner. PADCO filed an "Affidavit of Third Party Claim" with the Office of the City
Sheriff. Thereafter, PADCO filed with the Court of First Instance of Manila, a Motion to
Nullify Sale on Execution (With Injunction) which was opposed by the petitioner.
Respondent judge ruled in favor of PADCO hence the instant petition. Plaintiff contends
that the controlling stockholders of the Philippine American Drug Co. are also the same
controlling stockholders of the Graphic Publishing, Inc. and, therefore, the levy upon the
said machinery which was found in the premises occupied by the Graphic Publishing, Inc.
should be upheld.
ISSUE: Whether or not there is need to pierce the corporate veil.
HELD: It is true that a corporation, upon coming into being, is invested by law with a
personality separate and distinct from that of the persons composing it as well as from
any other legal entity to which it may be related. As a matter of fact, the doctrine that a
corporation is a legal entity distinct and separate from the members and stockholders
who compose it is recognized and respected in all cases which are within reason and the
law. However, this separate and distinct personality is merely a fiction created by law for
convenience and to promote justice. Accordingly, this separate personality of the
corporation may be disregarded, or the veil of corporate fiction pierced, in cases where it
is used as a cloak or cover for fraud or illegality, or to work an injustice, or where
necessary to achieve equity or when necessary for the protection of creditors. Likewise,
this is true when the corporation is merely an adjunct, business conduit or alter ego of
another corporation. In such case, the fiction of separate and distinct corporation entities
should be disregarded. In the instant case, petitioner's evidence established that PADCO
was never engaged in the printing business; that the board of directors and the officers
of GRAPHIC and PADCO were the same; and that PADCO holds 50% share of stock of
GRAPHIC. Petitioner likewise stressed that PADCO's own evidence shows that the
printing machine in question had been in the premises of GRAPHIC since May, 1965,
long before PADCO even acquired its alleged title on July 11, 1966 from Capitol
Publishing. That the said machine was allegedly leased by PADCO to GRAPHIC on
January 24, 1966, even before PADCO purchased it from Capital Publishing on July 11,
1966, only serves to show that PADCO's claim of ownership over the printing machine is
not only farce and sham but also unbelievable. Considering the principles and
circumstances mentioned, respondent judge should have pierced PADCO's veil of
corporate Identity. PREMISES CONSIDERED, Order of the then Court of First Instance
of Manila, is ANNULLED and SET ASIDE, and the Temporary Restraining Order issued
is hereby made permanent.
10. TOMAS LAO CONSTRUCTION, LVM CONSTRUCTION CORPORATION,
THOMAS and JAMES DEVELOPERS (PHIL.), INC., vs. NLRC, MARIO O.
LABENDIA, SR., ROBERTO LABENDIA, NARCISO ADAN, FLORENCIO GOMEZ,
ERNESTO BAGATSOLON, SALVADOR BABON, PATERNO BISNAR, CIRPRIANO
BERNALES, ANGEL MABUHAY, SR., LEO SURIGAO, and ROQUE MORILLO. G.R.
No. 116781 September 5, 1997
March 13, 2018

FACTS:

Petitioners were hired for various periods as construction workers in different capacities.
Within those periods, they alternately worked for petitioner TLC, T&J and LVM
Construction Corporation, altogether informally referred to as the “Lao Group of
Companies”, the three entities comprising a business conglomerate exclusively controlled
and managed by members of the Lao Family.

TLC, T&J and LVM are engaged in the construction of public roads and bridges. They
entered joint ventures among each other and lease tools and equipment of one another.
Each one also allows the utilization of their employees by the other two. In 1989,
petitioners were dismissed due to non-compliance with a memorandum which they
believe is a scheme to downgrade their status from regular to contractual employee.
Petitioners filed a case in NLRC for illegal dismissal which is granted and ordered the 3
corporations solidary liable for back wages and separation pay of petitioners.

ISSUE:

Whether corporate veil may be pierced to held the 3 corporations solidary liable to
petitioner employees.
RULING:

YES. The records disclose that the 3 corporations were in fact substantially owned and
controlled by members of the Lao family. A majority of the outstanding shares of stock in
LVM and T&J is owned by the Lao Family. T&J is 100% owned by the Lao’s as reflected
in its Articles of Incorporation. The Lao Group of Companies therefore is a closed
corporation where the incorporators and directors belong to a single family.
The corporations were also engaged in the same line of business under one management
and use the same equipment including manpower services. Where it appears that
business enterprises are owned, conducted and controlled by the same parties, both law
and equity will, when necessary to protect the right of third persons, disregard the legal
fiction that the corporations are distinct entities, and treat them as identical.

It is held that the liability of petitioner corporation extends to the responsible officers acting
in the interest of the corporations.