CAGAYAN FISHING DEVELOPMENT CO., INC.

, plaintiff-appellant,
vs.
TEODORO SANDIKO, defendant-appellee.
FACTS:
Manuel Tabora is the registered owner of four parcels of land
situated in the barrio of Linao, town of Aparri, Province of Cagayan.
To guarantee the payment of a loan in the sum of P8,000, Manuel
Tabora, on August 14, 1929, executed in favor of the Philippine
National Bank a first mortgage on the four parcels of land. A second
mortgage in favor of the same bank was in April of 1930 executed by
Tabora over the same lands to guarantee the payment of another
loan amounting to P7,000. A third mortgage on the same lands was
executed on April 16, 1930 in favor of Severina Buzon to whom
Tabora was indebted in the sum of P2,9000.
Tabora executed a public document by virtue of which the four
parcels of land owned by him was sold to the plaintiff company, said
to under process of incorporation, in consideration of one peso (P1)
subject to the mortgages in favor of the Philippine National Bank
and Severina Buzon and, to the condition that the certificate of title
to said lands shall not be transferred to the name of the plaintiff
company until the latter has fully and completely paid Tabora's
indebtedness to the Philippine National Bank.
The plaintiff company filed its article incorporation with the Bureau
of Commerce and Industry on October 22, 1930 (Exhibit 2). A year
later, on October 28, 1931, the board of directors of said company
adopted a resolution (Exhibit G) authorizing its president, Jose
Ventura, to sell the four parcels of lands in question to Teodoro
Sandiko for P42,000.
Exhibit C is a promisory note for P25,300 drawn by the defendant in
favor of the plaintiff, payable after one year from the date thereof.
Exhibit D is a deed of mortgage executed before a notary public in
accordance with which the four parcels of land were given a security
for the payment of the promissory note
The defendant having failed to pay the sum stated in the
promissory note, plaintiff, on January 25, 1934, brought this action
in the Court of First Instance of Manila praying that judgment be
rendered against the defendant for the sum of P25,300, with
interest at legal rate from the date of the filing of the complaint, and
the costs of the suits.
The trial court rendered judgment absolving the defendant, with
costs against the plaintiff. Plaintiff presented a motion for new trial
but denied.
ISSUE:
Did the plaintiff corporation possess any resultant right to
dispose of the parcels of land by sale to the defendant?
HELD:
None. The transfer was made almost five months before the
incorporation of the company. Unquestionably, a duly organized
corporation has the power to purchase and hold such real property
as the purposes for which such corporation was formed may permit
and for this purpose may enter into such contracts as may be
necessary.
But before a corporation may be said to be lawfully organized, many
things have to be done. Among other things, the law requires the
filing of articles of incorporation.
In the case before us it cannot be denied that the plaintiff was not
yet incorporated when it entered into a contract of sale. It was not
even a de facto corporation at the time. Not being in legal existence
then, it did not possess juridical capacity to enter into the contract.
Corporations are creatures of the law, and can only come into
existence in the manner prescribed by law.
. . . A corporation, until organized, has no being, franchises or
faculties. Nor do those engaged in bringing it into being have any
power to bind it by contract, unless so authorized by the charter
there is not a corporation nor does it possess franchise or faculties
for it or others to exercise, until it acquires a complete existence.
The contract here (Exhibit A) was entered into not between Manuel
Tabora and a non-existent corporation but between the Manuel
Tabora as owner of the four parcels of lands on the one hand and
the same Manuel Tabora, his wife and others, as mere promoters
of a corporations on the other hand. For reasons that are self-
evident, these promoters could not have acted as agent for a
projected corporation since that which no legal existence could
have no agent. A corporation, until organized, has no life.
Under the peculiar facts and circumstances of the present case we
decline to extend the DOCTRINE OF RATIFICATION which would
result in the commission of injustice or fraud to the candid and
unwary.
Tabora approached the defendant Sandiko and succeeded in the
making him sign Exhibits B, C, and D and in making him, among
other things, assume the payment of Tabora's indebtedness to the
Philippine National Bank. The promisory note, Exhibit C, was made
payable to the plaintiff company so that it may not be attached by
Tabora's creditors, two of whom had obtained writs of attachment
against the four parcels of land.
If the plaintiff corporation could not and did not acquire the four
parcels of land here involved, it follows that it did not possess any
resultant right to dispose of them by sale to the defendant,
Teodoro Sandiko.



National Development Company and New Agrix vs. Philippine
VeteransBank (192 SCRA 257)
Facts:Agrix Marketing executed in favor of respondent a real estate
mortgage overthree parcels of land. Agrix later on went bankrupt. In
order to rehabilitate thecompany, then President Marcos issued
Presidential Decree 1717 whichmandated, among others, the
extinguishing of all the mortgages and liensattaching to the property
of Agrix, and creating a Claims Committee to processclaims against
the company to be administered mainly by NDC.
Respondentthereon filed a claim against the company before the
Committee. Petitionershowever filed a petition with the RTC of
Calamba, Laguna invoking the provision of the law which cancels all
mortgage liens against it. Respondent took measures
toextrajudicially foreclose which the petitioners opposed by filing
another case inthe same court. These cases were consolidated. The
RTC held in favor of therespondent on the ground of
unconstitutionality of the decree; mainly violation of the separation
of powers, impairment of obligation of contracts, and violation of
the equal protection clause. Hence this petition.Issue:

Is the respondent estopped from questioning the constitutionality of
the lawsince they first abided by it by filing a claim with the
Committee?

Is PD 1717 unconstitutional?Ruling:On the issue of estoppel, the
Court held that it could not apply in thepresent case since when the
respondent filed his claim, President Marcos was thesupreme ruler
of the country and they could not question his acts even before
thecourts because of his absolute power over all government
institutions when hewas the President. The creation of New Agrix as
mandated by the decree was also ruled asunconstitutional since it
violated the prohibition that
the Batasang Pambansa(Congress) shall not provide for the
formation, organization, or regulation of private corporations unless
such corporations are owned or controlled by thegovernment.
PD 1717 was held as unconstitutional on the other grounds that it
was aninvalid exercise of police power, It had no lawful subject and
no lawful method. Itviolated due process by extinguishing all
mortgages and liens and interests whichare property rights unjustly
taken. It also violated the equal protection clause bylumping
together all secured and unsecured creditors. It also impaired
theobligation of contracts, even though it only involved purely
private interests.
Corporate Law Case Digest: Tayag v. Benguet (1968)
G.R. No. L-23145 November 29, 1968
Lessons Applicable: Theory of Concession (Corporate Law)

FACTS:

March 27, 1960: Idonah Slade Perkins died in New York City
August 12, 1960: Prospero Sanidad instituted ancillary
administration proceedings appointing ancillary administrator
Lazaro A. Marquez later on substituted by Renato D. Tayag
On January 27, 1964: CFI ordered domiciliary administrator
County Trust Company of New York to surrender to the ancillary
administrator in the Philippines 33,002 shares of stock certificates
owned by her in a Philippine corporation, Benguet Consolidated,
Inc., to satisfy the legitimate claims of local creditors
When County Trust Company of New York refused the court
ordered Benguet Consolidated, Inc. to declare the stocks lost and
required it to issue new certificates in lieu thereof
Appeal was taken by Benguet Consolidated, Inc. alleging the
failure to comply with its by-laws setting forth the procedure to be
followed in case of a lost, stolen or destroyed so it cannot issue new
stock certs.
ISSUE: W/N Benguet Consolidated, Inc. can ignore a court order
because of its by-laws
HELD: NO. CFI Affirmed
Fear of contigent liability - obedience to a lawful order = valid
defense
Benguet Consolidated, Inc. is a Philippine corporation owing full
allegiance and subject to the unrestricted jurisdiction of local courts
Assuming that a contrariety exists between the above by-law and
the command of a court decree, the latter is to be followed.
corporation is an artificial being created by operation of law...."It
owes its life to the state, its birth being purely dependent on its will.
Cannot ignore the source of its very existence
BATAAN
150 SCRA 181 Business Organization Corporation Law A
Corporation Cannot Invoke the Right Against Self-Incrimination

When President Corazon Aquino took power, the Presidential
Commission on Good Government (PCGG) was formed in order to
recover ill gotten wealth allegedly acquired by former President
Marcos and his cronies. Aquino then issued two executive orders in
1986 and pursuant thereto, a sequestration and a takeover order
were issued against Bataan Shipyard & engineering Co., Inc.
(BASECO). BASECO was alleged to be in actuality owned and
controlled by the Marcoses through the Romualdez family, and in
turn, through dummy stockholders.

The sequestration order issued in 1986 required, among others, that
BASECO produce corporate records from 1973 to 1986 under pain of
contempt of the PCGG if it fails to do so. BASECO assails this order as
it avers, among others, that it is against BASECOs right against self
incrimination and unreasonable searches and seizures.
ISSUE: Whether or not BASECO is correct.
HELD: No. First of all, PCGG has the right to require the production
of such documents pursuant to the power granted to it. Second, and
more importantly, right against self-incrimination has no application
to juridical persons. There is a reserve right in the legislature to
investigate the contracts of a corporation and find out whether it
has exceeded its powers. It would be a strange anomaly to hold that
a state, having chartered a corporation like BASECO to make use of
certain franchises, could not, in the exercise of sovereignty, inquire
how these franchises had been employed, and whether they had
been abused, and demand the production of the corporate books
and papers for that purpose.
Neither is the right against unreasonable searches and seizures
applicable here. There were no searches made and no seizure
pursuant to any search was ever made. BASECO was merely ordered
to produce the corporate records.
Adelio C. Cruz vs Quiterio L. DalisayAdm. Matter No. R-181-P July
31, 1987Fernan, J:
Administrative Matter in the Supreme Court.Malfeasance in office,
corrupt practices and serious irregularities.
Doctrine: A corporation has a personality distinct and separate from
its individual stockholders or members.Facts:
1.
In a sworn complaint dated July 23, 1984, Adelio Cruz (complainant)
charged Quiterio Dalisay (respondent),Senior Deputy Sheriff of
Manila, with malfeasance in office, corrupt practices and serious
irregularitiesallegedly committed as follows:
a.
Respondent attached and/or levied the money belonging to
complainant Cruz when he was nothimself the judgment debtor in
the final judgment of an NLRC case sought to be enforced but rather
the company known as Qualitrans Limousine Service,
Inc..b.Respondent also caused the service of the alias writ of
execution upon complainant who is aresident of Pasay City, despite
knowledge that his territorial jurisdiction covers Manila only
anddoes not extend to Pasay City.
2.
In his Comment, respondent explained that when he garnished
complainants cash deposit at the Philtrustbank he was merely
performing a ministerial duty. And that while it is true that said writ
was addressed toQualitrans Limousine Service, Inc., it is also a fact
that complainant had executed an affidavit before thePasay City
assistant fiscal stating that he is the owner/ president of Qualitrans.
Because of that declaration,the counsel for the plaintiff in the labor
case advised him to serve notice of garnishment on the
Philtrustbank.3.On November 12, 1984 this case was referred to the
executive judge of the RTC of Manila for investigation,report and
recommendation. However, prior to the termination of the
proceedings, complainant executed anaffidavit of desistance stating
that he is no longer interested in prosecuting the case and that there
was justa misunderstanding between complainant and
respondent.4.On May 29, 1986, acting on respondents motion the
executive judge issued an order recommending thedismissal of the
case.
Issue: WON the complaint should be dismissed based on
complainants motion of desistance.Held: NOReason:
1.It has been held that desistance of complainant does not preclude
the taking of disciplinary action againstrespondent.2.Respondents
actuation in enforcing a judgment against complainant who is not a
judgment debtor in thecase calls for disciplinary action. What is
incumbent upon respondent is to ensure that only the portion of
adecision ordained or decreed in the dispositive part should be the
subject of the execution.
3.
The tenor of the NLRC judgment and the implementing writ is clear
enough. It directed Qualitrans LimousineService, inc., to reinstate
the discharged employees and pay them full backwages.
Respondent, however,choose to pierce the veil of corporate entity
usurping a power belonging to the court and assumedimprovidently
that since the complainant is the owner/president of Qualitrans
Limousine Service, Inc., theyare one and the same. It is a well settled
doctrine both in law and equity that as a legal entity, a
corporationhas a personality distinct and separate from its individual
stockholders or members.
4.
The mere fact that one is president of the corporation does not
render the property he owns or possessesthe property of the
corporation, since that president, as an individual, and the
corporation are separateentities.
Decision: ACCORDINGLY, we find Respondent Deputy Sheriff
Quiterio l. Dalisay NEGLIGENT in theenforcement of the writ of
execution in NLRC Case No. 8-12389-91, and a fine equivalent to 3
months salaryis hereby imposed with a stern warning that the
commission of the same or similar offense in the future willmerit a
heavier penalty. Let a copy of the Resolution be filed in the personal
record of the respondent
Stockholders of F. Guanzon and Sons, Inc v. Register of Deeds of
Manila (1962)
G.R. No. L-18216 October 30, 1962
Lessons Applicable: Strong Juridical Personality (Corporate Law)

FACTS:
Sept 19, 1960: 5 stockholders of the F. Guanzon and Sons, Inc.
executed a certificate of liquidation of the assets of the corporation,
dissolution and distribution among themselves in proportion to their
shareholdings, as liquidating dividends, corporate assets, including
real properties Register of Deeds of Manila denied the registration
of the certificate of liquidation
The number of parcels not certified to in the acknowledgment;
P430.50 Reg. fees need be paid;
P940.45 documentary stamps need be attached to the document;
The judgment of the Court approving the dissolution and directing
the disposition of the assets of the corporation need be presented
Commissioner of Land Registration overruled ground No. 7 and
sustained requirements Nos. 3, 5 and 6.Stockholders appealed
contend that the certificate of liquidation is not a conveyance or
transfer but merely a distribution of the assets of the corporation
which has ceased to exist for having been dissolved
ISSUE: W/N certificate merely involves a distribution of the
corporation's assets (or should be considered a transfer or
conveyance)
HELD: NO. affirm the resolution appealed from
Corporation - juridical person distinct from the members
composing it.
Properties registered in the name of the corporation are owned
by it as an entity separate and distinct from its members.
While shares of stock constitute personal property they do not
represent property of the corporation.
A share of stock only typifies an aliquot part of the
corporation's property, or the right to share in its proceeds to that
extent when distributed according to law and equity but its holder is
NOT the owner of any part of the capital of the corporation nor
entitled to possession
The stockholder is not a co-owner or tenant in common of the
corporate property
ASSET 00 SCRA 579 Business Organization Corporation Law
Corporation Generally Not Entitled To Moral Damages Power To
Enter Into Contracts
In 1968, the government undertook to support the financing of
Marinduque Mining and Industrial Corporation (MMIC). The
government then issued debenture bonds in favor of MMIC which
enable the latter to take out loans from the Development Bank of
the Philippines (DBP) and the Philippine National Bank (PNB). The
loans were mortgaged by MMICs assets. In 1984 however, MMICs
indebtedness reached P13.7 billion and P8.7 billion to DPB and PNB
respectively. MMIC had trouble paying and this exposed the
government, because of the debenture bonds, to a P22 billion
obligation.

In order to mitigate MMICs loan liability, a financial restructuring
plan (FRP) was drafted in the presence of MMICs representatives as
well as representatives from DBP and PNB. The two banks however
never formally approved the said FRP. Eventually, the staggering
loans became overdue and PNB and DBP chose to foreclose MMICs
assets, FRP no longer feasible at that point. So the assets were
foreclosed and were eventually assigned to the Asset Privatization
Trust (APT).

Later, Jesus Cabarrus, Sr., a stockholder of MMIC initiated a
derivative suit against PNB and DBP with APT being impleaded as
the successor in interest of the two banks. The suit basically
questioned the foreclosure as Cabarrus asserted that the foreclosure
was invalid because he insisted that the FRP was adopted by PNB
and DBP as a consequence of the presence of the banks
representatives when the said FRP was drafted. Cabarrus asserts
that APT should restore the assets to MMIC and that PNB and DBP
should honor the FRP. The suit was filed in the RTC of Makati but
while the case was pending, the parties agreed to submit the case
for arbitration. Hence, Makati RTC dismissed the case upon motion
of the parties.
The Arbitration Committee (AC) which heard the case ruled in favor
of Cabarrus. The AC granted Cabarrus prayer and at the same time
awarded him P10 million in moral damages. Not only that, the AC
also awarded P2.5 billion in moral damages in favor of MMIC to be
paid by the government. APTs MFR was denied. Cabarrus then filed
before the Makati RTC a motion to confirm the arbitration award.
APT opposed the same as it alleged that the motion is improper.
Makati RTC denied APTs opposition and confirmed the arbitration
award. The Court of Appeals affirmed the ruling of the RTC.
ISSUE: Whether or not the ruling of the Arbitration Committee as
affirmed by the Regional Trial Court of Makati (Branch 62) and the
Court of Appeals is correct.
HELD: No.
The award of damages in favor of MMIC is improper. First, it was
not made a party to the case. The derivative suit filed by Cabarrus
failed to implead MMIC. So how can an award for damages be
awarded to a non-party? Second, even if MMIC, which is actually a
real party in interest, was impleaded, it is not entitled to moral
damages. It is not yet a well settled jurisprudence that corporations
are entitled to moral damages. While the Supreme Court in some
cases did award certain corporations moral damages for besmirched
reputations, such is not applicable in this case because when the
alleged wrongful foreclosure was done, MMIC was already in bad
standing hence it has no good wholesome reputation to protect. So
it could not be said that there was a reputation besmirched by the
act of foreclosure. Likewise, the award of moral damages in favor of
Cabarrus is invalid. He cannot have possibly suffered any moral
damages because the alleged wrongful act was committed against
MMIC. It is a basic postulate that a corporation has a personality
separate and distinct from its stockholders. The properties
foreclosed belonged to MMIC, not to its stockholders. Hence, if
wrong was committed in the foreclosure, it was done against the
corporation.
The FRP is not valid hence the foreclosure is valid. The mere
presence of DBPs and PNBs representatives during the drafting of
FRP is not constitutive of the banks formal approval of the FRP. The
representatives are personalities distinct from PNB and DBP. PNB
and DBP have their own boards and officers who may have different
decisions. The representatives were not shown to have been
authorized by the respective boards of the two banks to enter into
any agreement with MMIC.
Further, the proceeding is procedurally infirm. RTC Makati had
already dismissed the civil case when the parties opted for
arbitration. Hence, it should have never took cognizance of the
Cabarrus motion to confirm the AC award. The same should have
been brought through a separate action not through a motion
because RTC Makati already lost jurisdiction over the case when it
dismissed it to give way for the arbitration. The arbitration was a not
a continuation of the civil case filed in Makati RTC.
CEASE VS CA
FACTS:
Forrest Cease and five (5) other American citizens formed Tiaong
Milling and Plantation Company.Eventually, the shares of the other
original incorporators were bought out by Cease with his children.
The companys charter lapsed in June 1958. Forrest Cease died in
August 1959.
There was nomention whether there were steps to liquidate the
company. Some of his children wanted an actualdivision while
others wanted a reincorporation. Two of his children, Benjamin and
Florence, initiatedSpecial Proceeding No. 3893 with CFI Tayabas
asking that the Tiaong Milling and PlantationCorporation be
declared identical to Forrest Cease and that its properties be divided
among hischildren as intestate heirs. Defendants opposed the same
but the CFI ruled in favor of the plaintiffs.
Defendants filed a notice of appeal from the CFIs
decision but the same was dismissed for beingpremature. The case
was elevated to the SC which remanded it to the Court of Appeals.
The CA dismissed the petition.
ISSUE: Whether or not the Court of Appeals erred in affirming the
lower courts decision that
thesubject properties owned by the corporation are also properties
of the estate of Forrest Cease
HELD: NO. The trial court indeed found strong support, one that is
based on a well-entrenchedprinciple of law which is the theory of
"merger of Forrest L. Cease and The Tiaong Milling as
onepersonality", or that "the company is only the business conduit
and alter ego of the deceased ForrestL. Cease and the registered
properties of Tiaong Milling are actually properties of Forrest L.
Cease andshould be divided equally, share and share alike among his
six children, ... ", the trial court aptly applied the familiar exception
to the general rule by disregarding the legal fiction of distinct
andseparate corporate personality and regarding the corporation
and the individual member one and thesame. In shredding the
fictitious corporate veil, the trial judge narrated the undisputed
factualpremise, thus: While the records showed that originally its
incorporators were aliens, friends or third-parties inrelation to
another, in the course of its existence, it developed into a close
family corporation. TheBoard of Directors and stockholders belong
to one family the head of which Forrest L. Cease alwaysretained the
majority stocks and hence the control and management of its affairs.
It must be notedthat as his children increase or become of age, he
continued distributing his shares among themadding Florence,
Teresa and Marion until at the time of his death only 190 were left
to his name.Definitely, only the members of his family benefited
from the Corporation.
The corporation 'never' had any account with any banking institution
or if any account was carried ina bank on its behalf, it was in the
name of Mr. Forrest L. Cease. There is truth in plaintiff's
allegationthat the corporation is only a business conduit of his father
and an extension of his personality, they are one and the same
thing. Thus, the assets of the corporation are also the estate of
Forrest L. Cease,the father of the parties herein who are all
legitimate children of full blood. A rich store of jurisprudence has
established the rule known as the doctrine of disregarding
orpiercing the veil of corporate fiction.GENERAL RULE: a corporation
is vested by law with a personality separate and distinct from
thepersons composing it as well as any other legal entity to which it
may be related. By virtue of thisattribute, a corporation may not,
generally, be made to answer for acts or liabilities of its
stockholdersor those of the legal entities to which it may be
connected, and vice versa. This separate and distinctpersonality is,
however, merely a fiction created by law for convenience and to
promote the ends of justiceEXCEPTIONS: Such rule may not be used
or invoked 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 being. This isparticularly true where the fiction is used to
defeat public convenience, justify wrong, protect fraud,defend
crime, confuse legitimate legal or judicial issues, perpetrate
deception or otherwise circumventthe law This is likewise true
where the corporate entity is being used as an alter ego, adjunct, or
businessconduit for the sole benefit of the stockholders or of
another corporate. In any of these cases, thenotion of corporate
entity will be pierced or disregarded, and the corporation will be
treated merely as


Vlasons Enterprises vs. Court of Appeals
Facts: Florencio Sosuan purchased two pieces of salvaged bronze
propeller from Lo Bu. Thereafter, he filed a civil action in the CFI of
Manila for the recovery of possession of the same against Lo Bu and
also against persons from whom Lo Bu purchased the same, Alfonso
Calixto and Ernesto Valenzuela; and alternatively against Vlasons
Enterprises.
A few months before, the same propellers had been seized by virtue
of a search warrant issued by another branch of the CFI of Manila
presided over by Judge Maceren. It was issued at the instance of
Vlasons Enterprises who claimed that a certain Calixto stole the
propellers from their vessel that sunk in Bataan. The complaints for
theft against Calixto and Valenzuela, as well as the complaint for
Anti-Fencing against Sosuan, were dismissed.
Upon Sosuans motion in the civil action for recovery, Judge Cruz
authorized Sosuan to take possesson of the propellers pending
action. The order pointed out that no criminal action had been filed
in connection with the seizure of the propellers in question.
Issues: Whether Judge Cruz erred in 1) authorizing the release of the
propellers considering that it was under the custody of Judge
Macerens court; 2) in ordering the transfer of the propellers to
Sosuan pending action?
Held: 1) NO. Where personalty has been seized under a search
warrant, and it appears reasonably definite that the seizure will not
be followed by the filing of any criminal action for the prosecution of
the offenses in connection with which the warrant was issued, the
public prosecutors having pronounced the absence of basis therefor,
and there are, moreover, conflicting claims asserted over the seized
property, the appropriate remedy is the institution of an ordinary
civil action by any interested party, or of a special civil action of
interpleader by the Government itself.
The ordinary action and the interpleader are cognizable not only by
the court issuing the search warrant (in this case Judge Macerens
branch) but by any other competent court to which it may be
assigned by raffle. In such a case, the seizing court shall transfer
custody of the seized articles to the court having jurisdiction of the
civil action at any time, upon due application by an interested party.
Thus, it was proper for Judge Cruz to order the transfer of the
propellers to his branch. There is no conflict of jurisdiction because
there was no pending criminal action and Judge Macerens court
was merely acting as custodian of the seized property.
This case is different from the Pagkalinawan case. In Pagkalinawan
the same property was being seized at the same time by different
courts upon different writs: one by search warrant, the other by writ
of seizure issued in a replevin action. There was then a palpable and
real conflict in jurisdiction. And the Pagkalinawan ruling was laid
down precisely to avoid that conflict in jurisdiction. In the instant
case, however, since it was fairly certain that no criminal action
could possibly ensue subsequent to or in connection with the search
warrant, no such conflict in jurisdiction or in the ultimate disposition
of the seized property could be expected to arise.

2) YES. The absence of any criminal prosecution in the Maceren
Branch in relation to the propeller has no relevance whatever to the
question of whether or not in the civil suit before the Cruz Branch
the plaintiff, who claims to be the owner of the propeller, is entitled
to its possession pending action as against defendant Vlasons, who
also claims to be the owner thereof. Non sequitur. It merely makes
necessary the civil suit to precisely resolve that issue. It does not of
itself furnish basis for or warrant the transfer of possession from one
party to the other in the civil action.
Nothing in the record therefore justifies the Order of Judge Cruz
transferring possession of the property in controversy to the plaintiff
pendente lite. That relief can be awarded only after trial, by final
judgment declaring in whom the title to said property rests. What
may be done in the meantime, as already above pointed out, is
simply the transfer by the Maceren Branch, upon proper application,
of custody over the property to the Cruz Branch, there to await the
outcome of the suit
Yutivo Sons Hardware Co. vs. CTA
Post under case digests, Commercial Law at Wednesday, March 07,
2012 Posted by Schizophrenic Mind
Facts: Yutivo, a domestic corporation incorporated in 1916 under
Philippine laws, was engaged in the importation and sale of
hardware supplies and equipment. After the first world war, it
resumed its business and bought a number of cars and trucks from
General Motors(GM), an American Corporation licensed to do
business in the Philippines.
On June 13, 1946, the Southern Motors Inc,(SM) was organized to
engage in the business of selling cars, trucks and spare parts. One of
the subscribers of stocks during its incorporation was Yu Khe Thai,
Yu Khe Siong and Hu Kho Jin, who are sons of Yu Tiong Yee, one of
Yutivos founders.
After SMs incorporation and until the withdrawal of GM from the
Philippines, the cars and trucks purchased by Yutivo from GM were
sold by Yutivo to SM which the latter sold to the public.
Yutivo was appointed importer for Visayas and Mindanao by the US
manufacturer of cars and trucks sold by GM. Yutivo paid the sales
tax prescribed on the basis of selling price to SM. SM paid no sales
tax on its sales to the public.
An assessment was made upon Yutivo for deficiency sales tax. The
Collector of Internal Revenue, contends that the taxable sales were
the retail sales by SM to the public and not the sales at wholesale
made by Yutivo to the latter inasmuch as SM and Yutivo were one
and the same corporation, the former being a subsidiary of the
latter.
The assessment was disputed by petitioner. After reinvestigation, a
second assessment was made, sustaining the validity of the first
assessment. Yutivo contested the second assessment, alleging that
there is no valid ground to disregard the corporate personality of SM
and to hold that it is an adjunct of petitioner.
Issue: Whether or not the corporate personality of SM could be
disregarded.
Held: Yes. A corporation is an entity separate and distinct from its
stockholders and from other corporations to which it may be
connected. However, when the notion of legal entity is used to
defeat public convenience, justify wrong, protect fraud, or defend
crime, the law will regard the corporation as an association of
persons, or, in the case of two corporations, merge them into one.
When the corporation is a mere alter ego or business conduit of a
person, it may be disregarded.
SC ruled that CTA was not justified in finding that SM was organized
to defraud the Government. SM was organized in June 1946, from
that date until June 30, 1947, GM was the importer of the cars and
trucks sold to Yutivo, which in turn was sold to SM. GM, as importer
was the one solely liable for sales taxes. Neither Yutivo nor SM was
subject to the sales taxes. Yutivos liability arose only until July 1,
1947 when it became the importer. Hence, there was no tax to
evade.
However, SC agreed with the respondent court that SM was actually
owned and controlled by petitioner. Consideration of various
circumstances indicate that Yutivo treated SM merely as its
department or adjunct:
a. The founders of the corporation are closely related to each other
by blood and affinity.
b. The object and purpose of the business is the same; both are
engaged in sale of vehicles, spare parts, hardware supplies and
equipment.
c. The accounting system maintained by Yutivo shows that it
maintained high degree of control over SM accounts.
d. Several correspondences have reference to Yutivo as the head
office of SM. SM may even freely use forms or stationery of Yutivo.
e. All cash collections of SMs branches are remitted directly to
Yutivo.
f. The controlling majority of the Board of Directors of Yutivo is also
the controlling majority of SM.
g. The principal officers of both corporations are identical. Both
corporations have a common comptroller in the person of Simeon
Sy, who is a brother-in-law of Yutivos president, Yu Khe Thai.
h. Yutivo, financed principally the business of SM and actually
extended all the credit to the latter not only in the form of starting
capital but also in the form of credits extended for the cars and
vehicles allegedly sold by Yutivo to SM.

JACINTO SAGUID vs. CA, RTC, BRANCH 94, BOAC, MARINDUQUE
and GINA S. REY
FACTS:Seventeen-year old Gina S. Rey was married, but separated
de facto from her husband, when she met and cohabited with
petitioner Jacinto Saguid In 1996, the couple decided to separate
and end up their 9-year cohabitation. private respondent filed a
complaint for Partition and Recovery of Personal Property with
Receivership against the petitioner. She prayed that she be declared
the sole owner of these personal properties and that the amount of
P70,000.00, representing her contribution to the construction of
their house, be reimbursed to her.
ISSUE: WON there are actual contributions from the parties
HELD:
it is not disputed that Gina and Jacinto were not capacitated to
marry each other because the former was validly married to another
man at the time of her cohabitation with the latter. Their property
regime therefore is governed by Article 148 of the Family Code,
which applies to bigamous marriages, adulterous relationships,
relationships in a state of concubinage, relationships where both
man and woman are married to other persons, and multiple
alliances of the same married man. Under this regime, only the
properties acquired by both of the parties through their actual joint
contribution of money, property, or industry shall be owned by
them in common in proportion to their respective contributions
Proof of actual contribution is required.
Even if cohabitation commenced before family code, article 148
applies because this provision was intended precisely to fill up the
hiatus in Article 144 of the Civil Code.
The fact that the controverted property was titled in the name of
the parties to an adulterous relationship is not sufficient proof of co-
ownership absent evidence of actual contribution in the acquisition
of the property.
In the case at bar, the controversy centers on the house and
personal properties of the parties. Private respondent alleged in her
complaint that she contributed P70,000.00 for the completion of
their house. However, nowhere in her testimony did she specify the
extent of her contribution. What appears in the record are receipts
in her name for the purchase of construction materials.
While there is no question that both parties contributed in their
joint account deposit, there is, however, no sufficient proof of the
exact amount of their respective shares therein. Pursuant to Article
148 of the Family Code, in the absence of proof of extent of the
parties respective contribution, their share shall be presumed to be
equal.



FRANCISCO 309 SCRA 72 Business Organization Corporation
Law Piercing the Veil of Corporate Fiction (Upside Down)
In 1985, Francisco Motors Corporation (FMC) sued Atty. Gregorio
Manuel to recover from a him a sum of money in the amount of
P23,000.00+. Said amount was allegedly owed to them by Manuel
for the purchase of a jeep body plus repairs thereto. Manuel filed a
counterclaim in the amount of P50,000.00. In his counterclaim,
Manuel alleged that he was the Assistant Legal Officer for FMC; that
the Francisco Family, owners of FMC, engaged his services for the
intestate estate proceedings of one Benita Trinidad; that he was not
paid for his legal services; that he is filing the counterclaim against
FMC because said corporation was merely a conduit of the Francisco
Family. The trial court as well as the Court of Appeals granted
Manuels counterclaim on the ground that the legal fees were owed
by the incorporators of FMC (an application of the doctrine of
piercing the veil of corporation fiction in a reversed manner).
ISSUE: Whether or not the doctrine of piercing the veil of corporate
fiction was properly used by the Court of Appeals.
HELD: No. In the first place, the doctrine is to be used in disregarding
corporate fiction and making the incorporators liable in appropriate
circumstances. In the case at bar, the doctrine is applied upside
down where the corporation is held liable for the personal
obligations of the incorporators such was uncalled for and
erroneous. It must be noted that that Atty. Manuels legal services
were secured by the Francisco Family to represent them in the
intestate proceedings over Benita Trinidads estate. The
indebtedness was incurred by the Francisco Family in their separate
and personal capacity. These estate proceedings did not involve any
business of FMC. The proper remedy is for Manuel to sue the
concerned members of the Francisco Family in their individual
capacity.

MATUGINA Due Process Not Being Party to a Case
In 1973, license was issued to Milagros Matuguina to operate
logging businesses under her group Matuguina Logging Enterprises.
MIWPI was established in 1974 with 7 stockholders. Milagros
Matuguina became the majority stockholder later on. Milagros later
petitioned to have MLE be transferred to MIWPI. Pending approval
of MLEs petition, Davao Enterprises Corporation filed a complaint
against MLE before the District Forester (Davao) alleging that MLE
has encroached upon the area allotted for DAVENCORs timber
concession. The Investigating Committee found MLE guilty as
charged and had recommended the Director to declare that MLE has
done so. MLE appealed the case to the Ministry of Natural
Resources. During pendency, Milagrosa withdrew her shares from
MIWPI. Later, MNR Minister Ernesto Maceda found MLE guilty as
charged. Pursuant to the finding, DAVENCOR and Philip Co
requested Maceda to order MLE and/or MIWPI to comply with the
ruling to pay the value in pesos of 2352.04 m3 worth of timbers. The
Minister then issued a writ of execution against MIWPI. MIWPI filed
a petition for prohibition before the Davao RTC. The RTC ruled in
favor of MIWPI and has ordered to enjoin the Minister from
pursuing the execution of the writ. DAVENCOR appealed and the CA
reversed the ruling of the RTC. MIWPI averred that it is not a party
to the original case (as it was MLE that was sued a separate entity).
That the issuance of the order of execution by the Minister has been
made not only without or in excess of his authority but that the
same was issued patently without any factual or legal basis, hence, a
gross violation of MIWPIs constitutional rights under the due
process clause.
ISSUE: Whether or not MIWPIs right to due process has been
violated.
HELD: The SC ruled in favor of MIWPI. Generally accepted is the
principle that no man shall be affected by any proceeding to which
he is a stranger, and strangers to a case not bound by judgment
rendered by the court. In the same manner an execution can be
issued only against a party and not against one who did not have his
day in court. There is no basis for the issuance of the Order of
Execution against the MIWPI. The same was issued without giving
MIWPI an opportunity to defend itself and oppose the request of
DAVENCOR for the issuance of a writ of execution against it. In fact,
it does not appear that MIWPI was at all furnished with a copy of
DAVENCORs letter requesting for the Execution of the Ministers
decision against it. MIWPI was suddenly made liable upon the order
of execution by the respondent Secretarys expedient conclusions
that MLE and MIWPI are one and the same, apparently on the basis
merely of DAVENCORs letter requesting for the Order, and without
hearing or impleading MIWPI. Until the issuance of the Order of
execution, MIWPI was not included or mentioned in the proceedings
as having any participation in the encroachment in DAVENCORs
timber concession. This action of the Minister disregards the most
basic tenets of due process and elementary fairness. The liberal
atmosphere which pervades the procedure in administrative
proceedings does not empower the presiding officer to make
conclusions of fact before hearing all the parties concerned. (1996
Oct 24)
MAGSAYSAY-LABRADOR vs. COURT OF APPEALS
G.R. No. 58168. December 19, 1989.Fernan,
FACTS:
Private respondent Adelaida Rodriguez Magsaysay filed an action
against Subic LandCorporation (SUBIC), among others, to annul the
deed of assignment and deed of mortgageexecuted in favor of the
latter by her late husband.
Private respondent alleged that the subjectland of the two deeds
was acquired through conjugal funds. Since her consent to the
dispositionof the same was not obtained, she claimed that the acts
of assignment and mortgage weredone to defraud the conjugal
partnership. She further contended that the same were
donewithout consideration and hence null and void.
Petitioners, sisters of the deceased husband of the private
respondent, filed a motion for intervention on the ground that their
brother conveyedto them one-half of his shareholdings in SUBIC, or
about 41%. The trial court denied the motionfor intervention ruling
that petitioners have no legal interest because SUBIC has a
personalityseparate and distinct from its stockholders. The CA
confirmed the denial on appeal. Hence, thispetition.
ISSUE:Whether petitioners, as stockholders of SUBIC, have a legal
interest in the action for annulment of the deed of assignment and
deed of mortgage in favor of the corporation.
HELD:NO. The Court noted that the interest which entitles person to
intervene in a suitbetween other parties must be in the matter in
litigation and of such direct and immediatecharacter that the
intervenor will either gain or lose by the direct legal operation and
effect of the judgment. In the instant petition, it was said that the
interest, if it exists at all, of petitioners-movants is indirect,
contingent, remote, conjectural, consequential and collateral. At the
veryleast, their interest is purely inchoate, or in sheer expectancy of
a right in the management of the corporation and to share in the
profits thereof and in the properties and assets thereof
ondissolution, after payment of the corporate debts and obligations.
While a share of stockrepresents a proportionate or aliquot interest
in the property of the corporation, it does not vestthe owner thereof
with any legal right or title to any of the property, his interest in the
corporateproperty being equitable or beneficial in nature.
Shareholders are in no legal sense the ownersof corporate property,
which is owned by the corporation as a distinct legal person
Republic Planters Bank vs. Agana Case Digest
Republic Planters Bank vs. Agana
[GR 51765, 3 March 1997]
Facts: On 18 September 1961, the Robes-Francisco Realty &
Development Corporation (RFRDC) secured a loan from the Republic
Planters Bank in the amount of P120,000.00. As part of the proceeds
of the loan, preferred shares of stocks were issued to RFRDC
through its officers then, Adalia F. Robes and one Carlos F. Robes. In
other words, instead of giving the legal tender totaling to the full
amount of the loan, which is P120,000.00, the Bank lent such
amount partially in the form of money and partially in the form of
stock certificates numbered 3204 and 3205, each for 400 shares
with a par value of P10.00 per share, or for P4,000.00 each, for a
total of P8,000.00. Said stock certificates were in the name of Adalia
F. Robes and Carlos F. Robes, who subsequently, however, endorsed
his shares in favor of Adalia F. Robes.

Said certificates of stock bear the following terms and conditions:
"The Preferred Stock shall have the following rights, preferences,
qualifications and limitations, to wit: 1. Of the right to receive a
quarterly dividend of 1%, cumulative and participating. xxx 2. That
such preferred shares may be redeemed, by the system of drawing
lots, at any time after 2 years from the date of issue at the option of
the Corporation." On 31 January 1979, RFRDC and Robes proceeded
against the Bank and filed a complaint anchored on their alleged
rights to collect dividends under the preferred shares in question
and to have the bank redeem the same under the terms and
conditions of the stock certificates. The bank filed a Motion to
Dismiss 3 private respondents' Complaint on the following grounds:
(1) that the trial court had no jurisdiction over the subject-matter of
the action; (2) that the action was unenforceable under substantive
law; and (3) that the action was barred by the statute of limitations
and/or laches. The bank's Motion to Dismiss was denied by the trial
court in an order dated 16 March 1979. The bank then filed its
Answer on 2 May 1979. Thereafter, the trial court gave the parties
10 days from 30 July 1979 to submit their respective memoranda
after the submission of which the case would be deemed submitted
for resolution. On 7 September 1979, the trial court rendered the
decision in favor of RFRDC and Robes; ordering the bank to pay
RFRDC and Robes the face value of the stock certificates as
redemption price, plus 1% quarterly interest thereon until full
payment. The bank filed the petition for certiorari with the Supreme
Court, essentially on pure questions of law.
Issue:Whether the bank can be compelled to redeem the preferred
shares issued to RFRDC and Robes.
Whether RFRDC and Robes are entitled to the payment of certain
rate of interest on the stocks as a matter of right without necessity
of a prior declaration of dividend.
Held:
1. While the stock certificate does allow redemption, the option to
do so was clearly vested in the bank. The redemption therefore is
clearly the type known as "optional". Thus, except as otherwise
provided in the stock certificate, the redemption rests entirely with
the corporation and the stockholder is without right to either
compel or refuse the redemption of its stock. Furthermore, the
terms and conditions set forth therein use the word "may". It is a
settled doctrine in statutory construction that the word "may"
denotes discretion, and cannot be construed as having a mandatory
effect. The redemption of said shares cannot be allowed. The
Central Bank made a finding that the Bank has been suffering from
chronic reserve deficiency, and that such finding resulted in a
directive, issued on 31 January 1973 by then Gov. G. S. Licaros of the
Central Bank, to the President and Acting Chairman of the Board of
the bank prohibiting the latter from redeeming any preferred share,
on the ground that said redemption would reduce the assets of the
Bank to the prejudice of its depositors and creditors. Redemption of
preferred shares was prohibited for a just and valid reason. The
directive issued by the Central Bank Governor was obviously meant
to preserve the status quo, and to prevent the financial ruin of a
banking institution that would have resulted in adverse
repercussions, not only to its depositors and creditors, but also to
the banking industry as a whole. The directive, in limiting the
exercise of a right granted by law to a corporate entity, may thus be
considered as an exercise of police power.

2. Both Section 16 of the Corporation Law and Section 43 of the
present Corporation Code prohibit the issuance of any stock
dividend without the approval of stockholders, representing not less
than two-thirds (2/3) of the outstanding capital stock at a regular or
special meeting duly called for the purpose. These provisions
underscore the fact that payment of dividends to a stockholder is
not a matter of right but a matter of consensus. Furthermore,
"interest bearing stocks", on which the corporation agrees
absolutely to pay interest before dividends are paid to common
stockholders, is legal only when construed as requiring payment of
interest as dividends from net earnings or surplus only. In
compelling the bank to redeem the shares and to pay the
corresponding dividends, the Trial committed grave abuse of
discretion amounting to lack or excess of jurisdiction in ignoring
both the terms and conditions specified in the stock certificate, as
well as the clear mandate of the law.
DELPHER TRADES CORPORATION vs. IAC
G.R. No. L-69259 January 26, 1988
Facts:Delfin Pacheco and sister Pelagia were the owners of a parcel
of land in Polo (now Valenzuela). On April 3, 1974, they leased to
Construction Components International Inc. the property and
providing for a right of first refusal should it decide to buy the said
property
Construction Components International, Inc. assigned its rights and
obligations under the contract of lease in favor of Hydro Pipes
Philippines, Inc. with the signed conformity and consent of Delfin
and Pelagia. In 1976, a deed of exchange was executed between
lessors Delfin and Pelagia Pacheco and defendant Delpher Trades
Corporation whereby the Pachecos conveyed to the latter the leased
property together with another parcel of land also located in
Malinta Estate, Valenzuela for 2,500 shares of stock of defendant
corporation with a total value of P1.5M.
On the ground that it was not given the first option to buy the
leased property pursuant to the proviso in the lease agreement,
respondent Hydro Pipes Philippines, Inc., filed an amended
complaint for reconveyance of the lot.
Trivia lang: Delpher Trades Corp is owned by the Pacheco Family,
managed by the sons and daughters of Delfin and Pelagia. Their
primary defense is that there is no transfer of ownership because
the Pachecos remained in control of the original co-owners. The
transfer of ownership, if anything, was merely in form but not in
substance.
Issue:WON the Deed of Exchange of the properties executed by the
Pachecos and the Delpher Trades Corporation on the other was
meant to be a contract of sale which, in effect, prejudiced the Hydro
Phils right of first refusal over the leased property included in the
deed of exchange? NO
Held:By their ownership of the 2,500 no par shares of stock, the
Pachecos have control of the corporation. Their equity capital is 55%
as against 45% of the other stockholders, who also belong to the
same family group. In effect, the Delpher Trades Corporation is a
business conduit of the Pachecos. What they really did was to invest
their properties and change the nature of their ownership from
unincorporated to incorporated form by organizing Delpher Trades
Corporation to take control of their properties and at the same time
save on inheritance taxes.
The Deed of Exchange of property between the Pachecos and
Delpher Trades Corporation cannot be considered a contract of sale.
There was no transfer of actual ownership interests by the Pachecos
to a third party. The Pacheco family merely changed their ownership
from one form to another. The ownership remained in the same
hands. Hence, the private respondent has no basis for its claim of a
light of first refusal under the lease contract.
CAVEAT: The case has not fully explained the difference between
sale and barter. So here is a foreign decision.
State vs. Gillam, 47 Arkansas 555
Where one commodity is exchanged for another of the same kind or
a different kind, without agreement as to price, or reference to
money payment, the transaction is not a sale, but a barter or
exchange.
A sale may be deemed as an agreement for the transfer of the whole
ownership in a given article for a consideration, called a price in
money, or measured in money value. Stated in other words, it is a
transaction by which the one person, the seller, agrees to part with
his ownership in given property to another who agrees to receive
that ownership and make payment therefor. Now a barter is quite
different. It is a transaction whereby one person agrees to exchange
his ownership in one article of property for the ownership of
another article of property; it is a mere exchange of personal
property.
In this case, an exchange in ownership was made between the
shares of stocks and the land in dispite, but it was an exchange
merely, not a sale. No price in money was paid; there was merely an
exchange in ownership of two articles.