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COMMERCIAL LAW

1. G.R. No. 212034 July 2, 2018


COLEGIO MEDICO-FARMACEUTICO DE FILIPINAS, INC., Petitioner,
v. LILY LIM AND ALL PERSONS CLAMING UNDER HER, Respondent

Commercial Law; Corporation Code; Power of Board of Directors. The


general rule is that no person, not even its officers, can validly bind a
corporation without an express authority from the board of directors.

Same; Same; Exception; Power of President: The Court in People's Aircargo


and Warehousing Co., Inc. v. Court of Appeals sustained the authority of the
president to bind the corporation for the reason that the president has the
power to perform acts within the scope of his or her usual duties. Under
Sec. 23 of the Corporation Code, the power and the responsibility to decide
whether the corporation should enter into a contract that will bind the
corporation is lodged in the board, subject to the articles of incorporation,
by-laws, or relevant provisions of law. However, just as a natural person
may authorize another to do certain acts for and on his behalf, the board of
directors may validly delegate some of its functions and powers to officers,
committees or agents. The authority of such individuals to bind the
corporation is generally derived from law, corporate by laws or
authorization from the board, either expressly or impliedly by habit, custom
or acquiescence in the general course of business

2. G.R. Nos. 211820-21 June 6, 2018

KENSONIC, INC., Petitioner, v. UNI-LINE MULTI-RESOURCES, INC.,


(PHIL.), Respondent

G.R. Nos. 211834-35 June 6, 2018

UNI-LINE MULTI-RESOURCES, INC., Petitioner, v. KENSONIC, INC.,


Respondent

Commercial Law; Intellectual Propoerty; Generic Makrs. Section 123 (h) of


the Intellectual Property Code prohibits the registration of a trademark that
consists exclusively of signs that are generic for the goods or services that
they seek to identify. It is clear from the law itself, therefore, that what is
prohibited is not having a generic mark but having such generic mark being
identifiable to the good or service.

Same; Same; Factors in determining if goods are related: In resolving


whether goods are related, several factors come into play:(a)the business
(and its location) to which the goods belong; (b)the class of product to
which the goods belong; (c)the product's quality, quantity, or size, including
the nature of the package, wrapper or container; (d)the nature and cost of
the articles; (e)the descriptive properties, physical attributes or essential
characteristics with reference to their form, composition, texture or quality;
(f)the purpose of the goods; (g)whether the article is bought for immediate
consumption, that is, day-to-day household items; (h)the fields of
manufacture; (i)the conditions under which the article is usually purchased;
and (j)the channels of trade through which the goods flow, how they are
distributed, marketed, displayed and sold.

Same; Same; Same: In Taiwan Kolin Corporation, Ltd. v. Kolin Electronics,


Co., Inc., the Court has opined that the mere fact that goods belonged to
the same class does not necessarily mean that they are related. The
classification of the products under the NCL is merely part and parcel of the
factors to be considered in ascertaining whether they goods are related.
3. G.R. No. 200678 June 4, 2018

BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Petitioner, v.


BANGKO SENTRAL NG PILIPINAS and THE MONETARY BOARD,
Respondents

Commercial Law; Corporation Code; Insolvent Bank under Reeceivership. A


closed bank under receivership can only sue or be sued through its receiver,
the Philippine Deposit Insurance Corporation. Under Republic Act No.
7653, when the Monetary Board finds a bank insolvent, it may "summarily
and without need for prior hearing forbid the institution from doing
business in the Philippines and designate the Philippine Deposit Insurance
Corporation as receiver of the banking institution."

Same; Same; Philippine Deposit Insurance Corporation’s Duty of Receiver.


Philippine Deposit Insurance Corporation had the duty to conserve an
insolvent bank’s assets and to examine any possible liability that it might
undertake under a Business Plan. Philippine Deposit Insurance Corporation
also safeguards the interests of the depositors in all legal proceedings. Most
bank depositors are ordinary people who have entrusted their money to
banks in the hopes of growing their savings. When banks become insolvent,
depositors are secure in the knowledge that they can still recoup some part
of their savings through Philippine Deposit Insurance Corporation.
Philippine Deposit Insurance Corporation's participation in all suits
involving the insolvent bank is necessary and imbued with the public
interest.

4. G.R. No. 221813 July 23, 2018


MARICALUM MINING CORPORATION, Petitioner, v. ELY G.
FLORENTINO, ET. AL, Respondents

Commercial Law; Corporation Code; Piercing of Corporate Veil; Instances.


The doctrine of piercing the corporate veil applies only in three (3) basic
areas, namely: (a) defeat of public convenience as when the corporate
fiction is used as a vehicle for the evasion of an existing obligation; (b) fraud
cases or when the corporate entity is used to justify a wrong, protect fraud,
or defend a crime; or (c) alter ego cases, where a corporation is merely a
farce since it is a mere alter ego or business conduit of a person, or where
the corporation is so organized and controlled and its affairs are so
conducted as to make it merely an instrumentality, agency, conduit or
adjunct of another corporation.

Same; Same; Same; Elements. The piercing the veil of corporate fiction may
be allowed only if the following elements concur:1) Control — not mere
stock control, but complete domination — not only of finances, but of policy
and business practice in respect to the transaction attacked, must have
been such that the corporate entity as to this transaction had at the time no
separate mind, will or existence of its own; 2)Such control must have been
used by the defendant to commit a fraud or a wrong, to perpetuate the
violation of a statutory or other positive legal duty, or a dishonest and an
unjust act in contravention of plaintiffs legal right; and 3)The said control
and breach of duty must have proximately caused the injury or unjust loss
complained of.

5. G.R. No. 199625 June 6, 2018


JEROME CANLAS, Petitioner v. GONZALO BENJAMIN A. BONGOLAN,
ET. AL, Respondents

Commercial Law; Corporation Code; Application to GOCCs. . Under Section


30 of Republic Act No. 10149, the Corporation Code applies suppletorily to
government-owned and -controlled corporations.

Same; Same; Same. Section 23 of the Corporation Code necessarily applies


which provides that the Board of Directors of a corporation exercises the
entire corporation's powers, conducts all its business, and controls all its
properties.

Same; Same; Corporation Officers; Liability. Officers who supervise and


manage the corporation's affairs, such that they are responsible for the
commission of the offense, cannot escape criminal or administrative liability
by invoking the separate and distinct personality of the corporation. The
party who will be meted the penalty is the public officer or employee who is
guilty of the administrative offense. Thus, while the Board of Directors is
primarily responsible for the sale, respondents may still be held liable for
offenses if they knowingly entered into, facilitated, or participated in their
execution and ensured their implementation.
G.R. No. 212034 July 2, 2018
COLEGIO MEDICO-FARMACEUTICO DE FILIPINAS, INC. vs. LILY
LIM AND ALL PERSONS CLAMING UNDER HER

Commercial Law; Corporation Code; Power of Board of Director s: The


general rule is that no person, not even its officers, can validly bind a
corporation without an express authority from the board of directors.

Same; Same; Exception; Power of President: The Court in People's Aircargo


and Warehousing Co., Inc. v. Court of Appeals sustained the authority of the
president to bind the corporation for the reason that the president has the
power to perform acts within the scope of his or her usual duties. Under
Sec. 23 of the Corporation Code, the power and the responsibility to decide
whether the corporation should enter into a contract that will bind the
corporation is lodged in the board, subject to the articles of incorporation,
by-laws, or relevant provisions of law. However, just as a natural person
may authorize another to do certain acts for and on his behalf, the board of
directors may validly delegate some of its functions and powers to officers,
committees or agents. The authority of such individuals to bind the
corporation is generally derived from law, corporate by laws or
authorization from the board, either expressly or impliedly by habit, custom
or acquiescence in the general course of business

DEL CASTILLO, J.:


FACTS: Petitioner owns a building in Sampaloc, Manila which it leased to
respondent, the President/Officer-in-charge of St. John Berchman School of
Manila Foundation (St. John), for the period of June 2005 to May 2006.
When the lease expired, petitioner, represented by its then President Dr.
Virgilio C. Del Castillo (Del Castillo), sent another Contract of Lease for the
period of June 2006 to May 2007 which was not returned by respondent.
During a board meeting, petitioner informed respondent of the decision of
the Board of Directors not to renew the Contract of Lease. Del Castillo
wrote a letter to respondent demanding the payment of her back rentals
and utility bills with a request to vacate the subject property on or before
March 16, 2008 but to no avail. Thus, petitioner filed a Complaint with
Ejectment and Damages with MeTC against respondent.
MeTC dismissed the Complaint for lack of a valid demand letter due to
failure of petitioner to show that Del Castillo was duly authorized by the
Board to issue the same.
RTC reversed MeTC and ruled that Del Castillo issued the demand letter in
the usual course of business which was ratified by petitioner when it passed
the Board Resolution authorizing Del Castillo to file a case against
respondent.
Upon appeal, the CA reversed RTC and dismissed the complaint. It opined
that petitioner's failure to attach a copy of the Board Resolution to the
Complaint was a fatal defect.
ISSUE: Whether or not there was a valid written demand upon respondent
to pay the unpaid rentals and vacate the subject property.
HELD: AFFIRMATIVE. In People's Aircargo and Warehousing Co., Inc. v.
Court of Appeals, the Court laid down an exception to the general rule that
no person, not even its officers, can validly bind a corporation without an
express authority from the board of directors. In that case, the Court
sustained the authority of the president to bind the corporation for the
reason that the president has the power to perform acts within the scope of
his or her usual duties. The Court explained that being a juridical entity, a
corporation may act through its board of directors, which exercises almost
all corporate powers, lays down all corporate business policies and is
responsible for the efficiency of management, as provided in Section 23 of
the Corporation Code of the Philippines. Under this provision, the power
and the responsibility to decide whether the corporation should enter into a
contract that will bind the corporation is lodged in the board, subject to the
articles of incorporation, by-laws, or relevant provisions of law. However,
just as a natural person may authorize another to do certain acts for and on
his behalf, the board of directors may validly delegate some of its functions
and powers to officers, committees or agents. The authority of such
individuals to bind the corporation is generally derived from law, corporate
by laws or authorization from the board, either expressly or impliedly by
habit, custom or acquiescence in the general course of business.
In this case, the issuance of the demand letter to collect the payment of
unpaid rentals from respondent and to demand the latter to vacate the
subject property was done in the ordinary course of business, and thus,
within the scope of the powers of Del Castillo. In fact, it was his duty as
President to manage the affairs of petitioner, which included the collection
of receivables. Accordingly, even without a board resolution, Del Castillo
had the power and authority to issue the demand letter.
In any case, even if, for the sake of argument, Del Castillo acted beyond the
scope of his authority in issuing the demand letter, the subsequent issuance
of the Board Resolution cured any defect possibly arising therefrom as it
was a clear indication that the Board agreed to, consented to, acquiesced
in, or ratified the issuance of the said demand letter.
G.R. Nos. 211820-21 June 6, 2018

KENSONIC, INC. vs. UNI-LINE MULTI-RESOURCES, INC., (PHIL.)

G.R. Nos. 211834-35 June 6, 2018

UNI-LINE MULTI-RESOURCES, INC. vs. KENSONIC, INC.

Commercial Law; Intellectual Property; Generic Marks : Section 123 (h) of


the Intellectual Property Code prohibits the registration of a trademark that
consists exclusively of signs that are generic for the goods or services that
they seek to identify. It is clear from the law itself, therefore, that what is
prohibited is not having a generic mark but having such generic mark being
identifiable to the good or service.

Same; Same; Prohibition under Sec. 123, IPC: The right to a trademark
should not be made to depend on mere possibilities and conjectures. The
prohibition under Section 123 of the Intellectual Property Code extends to
goods that are related to the registered goods, not to goods that the
registrant may produce in the future. To allow the expansion of coverage is
to prevent future registrants of goods from securing a trademark on the
basis of mere possibilities and conjectures that may or may not occur at all.

BERSAMIN, J.:
FACTS: Uni-Line filed an application for registration for the mark
“SAKURA” covering goods such as amplifier, speaker, cassette, cassette
disk, video cassette disk, car stereo, television, digital video disk, mini
component, tape deck, compact disk charger, VHS, and tape rewinder
falling under Class 09 of the Nice International Classification of Goods
which was opposed by Kensonic. The Director of the Bureau of Legal Affairs
(BLA) rejected such application and ruled that Kensonic was the first to use
and adopt the mark “SAKURA” since 1994. Eventually the decision of the
BLA became final and executory.
While the case was pending, a certificate for registration of the mark
“SAKURA & FLOWER DESIGN was issued in favor of Uni-Line for use on
recordable compact disk (CD-R) computer, computer parts and accessories
falling under Class 09. Upon knowledge of such, Kensonic then filed a
petition for the cancellation of the same which was granted by the BLA
Director.
Subsequently, Uni-Line was issued a certificate of registration for the
trademark “SAKURA” covering washing machines, high pressure washers,
vacuum cleaners, floor polishers, blender, electric mixer, electrical juicer
falling under Class 07, television sets, stereo components, DVD/VCD
players, voltage regulators, portable generators, switch breakers, fuse
falling under Class 09 and refrigerators, air conditioners, oven toaster,
turbo broiler, rice cooker, microwave oven, coffee maker, sandwich/waffle
maker, electric stove, electric fan, hot & cold water dispenser, airpot,
electric griller and electric hot pot falling under Class 11, which was then
sought to be cancelled by Kensonic. The BLA ruled in favor of Kensonic. On
appeal, the Director General of the IPO modified the decision of the BLA by
upholding Uni-Line’s registration of “SAKURA” mark as to goods falling
under Class 07 and 11. Not satisfied with the judgment, both parties
appealed to the CA which upheld Kensonic's ownership of the SAKURA
mark evidenced by its use since 1994, but ruled that despite the identical
marks of Kensonic and Uni-Line, Kensonic's goods under Class 09 were
different from or unrelated to Uni-Line's goods under Class 07 and Class 11.
Kensonic sought partial reconsideration which led the CA to amend its
previous decision thereby cancelling the registration of the SAKURA mark
covering all the goods of Uni- Line falling under Class 09 on the basis that
all the goods belonged to the general class of goods.
ISSUES:
1. Whether or not the SAKURA mark is capable of appropriation.
2. Whether or not Kensonic's goods falling under Class 09 are related to
Uni-Line's goods falling under Class 07 and Class 11.
3. Whether or not Uni-Line's goods falling under Class 09, namely:
voltage regulators, portable generators, switch breakers and fuses,
related to Kensonic's goods falling under Class 09.
HELD:
1. AFFIRMATIVE. Section 123 (h) of the Intellectual Property Code
prohibits the registration of a trademark that consists exclusively of signs
that are generic for the goods or services that they seek to identify. It is
clear from the law itself, therefore, that what is prohibited is not having a
generic mark but having such generic mark being identifiable to the good or
service. Although SAKURA refers to the Japanese flowering cherry and is,
therefore, of a generic nature, such mark did not identify Kensonic's goods.
Kensonic's DVD or VCD players and other products could not be identified
with cherry blossoms. Hence, the mark can be appropriated.
2. NEGATIVE. The prohibition under Section 123 of the Intellectual
Property Code extends to goods that are related to the registered goods, not
to goods that the registrant may produce in the future. The right to a
trademark should not be made to depend on mere possibilities and
conjectures.
The Court held that the goods of Uni-Line were not related to the goods of
Kensonic by virtue of their differences in class, the descriptive attributes,
the purposes and the conditions of the goods.
3. NEGATIVE. The mere fact that goods belonged to the same class does
not necessarily mean that they are related. The classification of the
products is merely part and parcel of the factors to be considered in
ascertaining whether they goods are related.
The list of products under Class 9 can be sub-categorized into five
classifications, namely: (1) apparatus and instruments for scientific or
research purposes, (2) information technology and audiovisual equipment,
(3) apparatus and devices for controlling the distribution and use of
electricity, (4) optical apparatus and instruments, and (5) safety equipment.
From this sub-classification, it becomes apparent that Kensonic's products,
i.e., televisions and DVD players, belong to audiovisual equipment, while
that of Uni – Line, consisting of automatic voltage regulator, converter,
recharger stereo booster, AC-DC regulated power supply, step-down
transformer, and PA amplified AC-DC, generally fall under devices for
controlling the distribution and use of electricity. Also, the Class 09 goods of
Kensonic were final products but Uni-Line's Class 09 products were spare
parts. In view of these distinctions, the Court agrees with Uni-Line that its
Class 09 goods were unrelated to the Class 09 goods of Kensonic.
G.R. No. 200678 June 4, 2018

BANCO FILIPINO SAVINGS AND MORTGAGE BANK vs. BANGKO


SENTRAL NG PILIPINAS and THE MONETARY BOARD

Commercial Law; Corporation Code; Insolvent Bank under Receivership. A


closed bank under receivership can only sue or be sued through its receiver,
the Philippine Deposit Insurance Corporation (PDIC). Under Republic Act
No. 7653, when the Monetary Board finds a bank insolvent, it may
"summarily and without need for prior hearing forbid the institution from
doing business in the Philippines and designate the PDIC as receiver of the
banking institution."

Same; Same; PDIC as statutory receiver of closed banks: PDIC had the duty
to conserve an insolvent bank’s assets and to examine any possible liability
that it might undertake under a Business Plan. PDIC also safeguards the
interests of the depositors in all legal proceedings. Most bank depositors
are ordinary people who have entrusted their money to banks in the hopes
of growing their savings. When banks become insolvent, depositors are
secure in the knowledge that they can still recoup some part of their
savings through PDIC. PDIC's participation in all suits involving the
insolvent bank is necessary and imbued with the public interest.

LEONEN, J.:
FACTS: Upon suffering from heavy withdrawals, Banco Filipino sought the
help of Bangko Sentral and asked the latter for financial assistance through
emergency loans and credit easement terms. PDIC was then assigned as the
receiver of Banco Filipino. Bangko Sentral required Banco Filipino to
submit a rehabilitation plan approved by the former. A long term business
plan was submitted by Banco Filipino which was not acted upon by Bangko
Sentral due to the fact that it was neither confirmed nor approved by Banco
Filipino’s Board of Directors. After several revisions of the business plan,
Banco Filipino informed Bangko Sentral that it was constrained to accept
the reduced version of the Financial Assistance Package and Regulatory
Reliefs. It, however, asserted that it did not agree with the condition to
dismiss and withdraw its cases against Bangko Sentral since this would
require a separate discussion. Eventually, there was a failure to reach a
mutually acceptable settlement.
Banco Filipino filed a Petition for Certiorari and Mandamus with prayer for
issuance of a temporary restraining order and writ of preliminary injunction
and assailed the alleged "arbitrary, capricious and illegal acts" of Bangko
Sentral and of the Monetary Board in coercing Banco Filipino to withdraw
all its present suits in exchange of the approval of its Business Plan.
The RTC granted the request for the issuance of the TRO. The CA granted
the application of the writ of preliminary injunction and enjoined the RTC to
conduct further proceedings because the latter had no jurisdiction over the
same. Banco Filipino’s motion for reconsideration was denied which
prompted it to file a petition for review on certiorari. Banco Filipino claims
that it had the authority to file the same since the CA found its closure and
receivership to have been illegal.
ISSUE: Whether or not Banco Filipino, as a closed bank under receivership,
could file this Petition for Review without joining its statutory receiver, the
Philippine Deposit Insurance Corporation, as a party to the case.
HELD: NEGATIVE. A closed bank under receivership can only sue or be
sued through its receiver, the Philippine Deposit Insurance Corporation.
Under Republic Act No. 7653, when the Monetary Board finds a bank
insolvent, it may summarily and without need for prior hearing forbid the
institution from doing business in the Philippines and designate the PDIC as
receiver of the banking institution. The relationship between the PDIC and a
closed bank is fiduciary in nature. Section 30 of Republic Act No. 7653
directs the receiver of a closed bank to immediately gather and take charge
of all the assets and liabilities of the institution and administer the same for
the benefit of its creditors.
It was speculative on petitioner's part to presume that it could file this
Petition without joining its receiver on the ground that PDIC might not allow
the suit. Petitioner should have shown that it attempted to seek PDIC’s
authorization to file the suit. If PDIC had refused to allow petitioner to file
its suit, petitioner still had a remedy available to it. Under Rule 3, Section
10 of the Rules of Court, petitioner could have made PDIC an unwilling co-
petitioner and be joined as a respondent to this case.
Petitioner's suit concerned its Business Plan, a matter that could have
affected the status of its insolvency. PDIC's participation would have been
necessary, as it had the duty to conserve petitioner's assets and to examine
any possible liability that petitioner might undertake under the Business
Plan.
PDIC also safeguards the interests of the depositors in all legal proceedings.
Most bank depositors are ordinary people who have entrusted their money
to banks in the hopes of growing their savings. When banks become
insolvent, depositors are secure in the knowledge that they can still recoup
some part of their savings through PDIC. Thus, PDIC's participation in all
suits involving the insolvent bank is necessary and imbued with the public
interest.
G.R. No. 221813 July 23, 2018

MARICALUM MINING CORPORATION vs. ELY G. FLORENTINO, ET.


AL.

Commercial Law; Corporation Code; Piercing of Corporate Veil; Instances.


The doctrine of piercing the corporate veil applies only in three (3) basic
areas, namely: (a) defeat of public convenience as when the corporate
fiction is used as a vehicle for the evasion of an existing obligation; (b) fraud
cases or when the corporate entity is used to justify a wrong, protect fraud,
or defend a crime; or (c) alter ego cases, where a corporation is merely a
farce since it is a mere alter ego or business conduit of a person, or where
the corporation is so organized and controlled and its affairs are so
conducted as to make it merely an instrumentality, agency, conduit or
adjunct of another corporation.

Same; Same; Same; Elements. The piercing the veil of corporate fiction may
be allowed only if the following elements concur:1) Control — not mere
stock control, but complete domination — not only of finances, but of policy
and business practice in respect to the transaction attacked, must have
been such that the corporate entity as to this transaction had at the time no
separate mind, will or existence of its own; 2)Such control must have been
used by the defendant to commit a fraud or a wrong, to perpetuate the
violation of a statutory or other positive legal duty, or a dishonest and an
unjust act in contravention of plaintiffs legal right; and 3)The said control
and breach of duty must have proximately caused the injury or unjust loss
complained of.

GESMUNDO, J.:
FACTS: The National Government through the Asset Privatization Trust
(APT) executed a Purchase and Sale Agreement (PSA) with G Holdings,
which bought 90% of Maricalum Mining's shares and financial claims later
secured by mortgages over some properties of Maricalum Mining. In
exchange, the PSA obliged G Holdings to pay APT the amount of
P673,161,280.00, with a down payment of P98,704,000.00 and with the
balance divided into four payable installments in ten years. Upon the
signing of the PSA and paying the stipulated down payment, G Holdings
immediately took physical possession of Maricalum Mining's Sipalay Mining
Complex and took full control of the latter's management and operations.
The Sipalay General Hospital, Inc. (Sipalay Hospital) was duly incorporated
to provide medical services and facilities to the general public. Afterwards,
some of Maricalum Mining's employees retired and formed several
manpower cooperatives which executed identical sets of Memorandum of
Agreement with Maricalum Mining wherein they undertook to provide the
latter with a steady supply of workers, machinery and equipment for a
monthly fee.
On June 1, 2001, Maricalum Mining informed the cooperative of the
former’s decision to stop its mining and milling operations effective July 1,
2001 to forestall continuing losses. Eventually, the mortgaged properties of
Maricalum Mining were extrajudicially foreclosed and sold to G Holdings as
the highest bidder.
Some of Maricalum Mining's workers and some of Sipalay General
Hospital's employees jointly filed a complaint with the LA against G
Holdings, its president, and officer-in-charge, and the cooperatives and its
officers for illegal dismissal and money claims contending that the
manpower cooperatives were mere alter egos of G Holdings organized to
subvert the "tenurial rights" of the complainants; and G Holdings was their
employer because it allegedly had the power to hire, pay wages, control
working methods and dismiss them.
Correspondingly, G Holdings maintained that it was Maricalum Mining who
entered into an agreement with the manpower corporations for the
employment of complainants' services; the manpower cooperatives were the
ones who paid the wages and other benefits, and had control over the
working means and methods of complainants; Maricalum Mining, as well as
the manpower cooperatives, each have distinct legal personalities and that
their individual corporate liabilities cannot be imposed upon each other.
The LA ruled in favor of complainant explaining that G Holdings and
Maricalum Mining have separate and distinct corporate personalities. Said
decision was later affirmed by NLRC and CA.
ISSUE: Whether or not Maricalum Mining's corporate veil may be pierced
in order to allow complainants to enforce their monetary awards against G
Holdings.
HELD: NEGATIVE. The doctrine of piercing the corporate veil applies only
in three (3) basic areas, namely: (a) defeat of public convenience as when
the corporate fiction is used as a vehicle for the evasion of an existing
obligation; (b) fraud cases or when the corporate entity is used to justify a
wrong, protect fraud, or defend a crime; or (c) alter ego cases, where a
corporation is merely a farce since it is a mere alter ego or business conduit
of a person, or where the corporation is so organized and controlled and its
affairs are so conducted as to make it merely an instrumentality, agency,
conduit or adjunct of another corporation. A holding corporation has a
separate corporate existence and is to be treated as a separate entity;
unless the facts show that such separate corporate existence is a mere
sham, or has been used as an instrument for concealing the truth.
In the case at bench, complainants mainly harp their cause on the
alter ego theory. Under this theory, piercing the veil of corporate fiction may
be allowed only if there is 1) Control which must have been such that the
corporate entity as to this transaction had at the time no separate mind, will
or existence of its own; 2) Such control must have been used by the
defendant to commit a fraud or a wrong, to perpetuate the violation of a
statutory or other positive legal duty, or a dishonest and an unjust act in
contravention of plaintiffs legal right; and 3) The said control and breach
of duty must have proximately caused the injury or unjust loss complained
of.
In the instant case, there is no doubt that G Holdings — being the
majority and controlling stockholder — had been exercising significant
control over Maricalum Mining. However, mere presence of control and full
ownership of a parent over a subsidiary is not enough to pierce the veil of
corporate fiction.
Also the complainants did not satisfy the requisite quantum of
evidence to prove fraud on the part of G Holdings. They merely offered
allegations and suppositions. There must be proof that fraud—not the
inevitable effects of a previously executed and valid contract such as the
PSA—was the cause of the latter's total asset depletion.
With regard the third element, complainants have not yet even
suffered any monetary injury. They failed to show that G Holdings's mere
exercise of control had a clear hand in the depletion of Maricalum Mining's
assets, no proximate cause was successfully established. The transfer of
assets was pursuant to a valid and legal PSA between G Holdings and APT.
Because the abovementioned elements are not satisfied, Maricalum
Mining’s cannot be pierced.
G.R. No. 199625 June 6, 2018
JEROME CANLAS vs. GONZALO BENJAMIN A. BONGOLAN, ET. AL.

Commercial Law; Corporation Code; Application to GOCCs. . Under Section


30 of Republic Act No. 10149, the Corporation Code applies suppletory to
government-owned and controlled corporations. Thus, Section 23 of the
Corporation Code necessarily applies which provides that the Board of
Directors of a corporation exercises the entire corporation's powers,
conducts all its business, and controls all its properties.

Same; Same; Corporation Officers; Liability. Officers who supervise and


manage the corporation's affairs, such that they are responsible for the
commission of the offense, cannot escape criminal or administrative liability
by invoking the separate and distinct personality of the corporation. The
party who will be meted the penalty is the public officer or employee who is
guilty of the administrative offense. Thus, while the Board of Directors is
primarily responsible for the sale, respondents may still be held liable for
offenses if they knowingly entered into, facilitated, or participated in their
execution and ensured their implementation.

LEONEN, J.:
FACTS: The National Housing Authority (NHA) and R-II Builders, Inc. (R-II)
executed a joint venture agreement to convert the Smokey Mountain
Dumpsite into a habitable housing with commercial and industrial
development. To support the Project’s securitization, NHA and R-II engaged
Home Guaranty Corp. to act as guarantor.
NHA, R-II, Home Guaranty and PNB entered into a Trust Agreement
wherein they agreed to employ the asset backed securitization method
which made PNB the trustee of the asset pool who will issue the
Participation Certificates. The parties also executed a Contract of Guaranty.
When the Participation Certificates matured, the Planters Bank became the
trustee. Because of the asset pool's inability to pay for the Participation
Certificates, Planters Bank called on Home Guaranty's guaranty, in which
the call was approved by Hone Guaranty’s Board of Directors, with no
objection from R-II.
Planters Bank transferred the entire asset pool properties to Home
Guaranty through a Deed of Assignment and Conveyance. Home Guaranty
published a Notice of Sale seeking to sell the properties in the asset pool.
Alfred Wong King Wai (Wong) proposed to purchase two (2) lots in the asset
pool for P 14,000.00 per square meter but eventually was sold at P
13,000.00 due to 5% discount for cash payments.
Canlas, in his capacity as R-II's Vice President for Legal, and Harbour
Centre's Corporate Secretary, then filed a complaint – affidavit before the
Office of the Ombudsman against Home Guaranty’s officers for grave
misconduct and of entering into a contract grossly disadvantageous to the
government. The Office of the Ombudsman dismissed the complaint for lack
of proof and found that the Board of Directors of Home Guaranty was the
one liable. Upon appeal, the CA affirmed the finding of the Office of the
Ombudsman.
ISSUE: Whether or not the Home Guaranty Officers are the proper parties
charged with the offense.
HELD: NEGATIVE. Home Guaranty is governed by its Board of Directors,
which directs, controls, and manages its activities. The decisions of the
Board of Directors are arrived at by a majority vote of its members. It is
even the Board of Directors that approves the standard terms and
conditions in a Contract of Guaranty to be executed by Home Guaranty.
Thus, it was the Board of Directors that had the power to decide whether
the properties were to be sold and at what price.
As a government-owned and -controlled corporation, Home Guaranty is also
governed by Republic Act No. 10149. Under Section 30 of Republic Act No.
10149, the Corporation Code applies suppletorily to government-owned and
-controlled corporations. Section 23 of the Corporation Code necessarily
applies in the instant case which provides that the Board of Directors of a
corporation exercises the entire corporation's powers, conducts all its
business, and controls all its properties. Thus, it is Home Guaranty's Board
of Directors that is primarily responsible for the sale.
Nonetheless, officers who supervise and manage the corporation's affairs,
such that they are responsible for the commission of the offense, cannot
escape criminal or administrative liability by invoking the separate and
distinct personality of the corporation. The party who will be meted the
penalty is the public officer or employee who is guilty of the administrative
offense. Thus, while the Board of Directors is primarily responsible for the
sale, respondents may still be held liable for offenses if they knowingly
entered into, facilitated, or participated in their execution and ensured their
implementation.