CASES IN

CORPORATION
Law on Corporation Code

Prepared by:

NOGOY, SARAH JOY Y.

LLB-IV
 RENATO TAYAG VS. BENGUET CONSOLIDATED
INC.
Facts:

Idonah Perkins died in NY. She left behind properties here and
abroad. She left behind two (2) stocks certificates of Benguet (BCI) in
possession of Country Trust Company of New York (CTC-NY) which
was the domiciliary administrator or Perkins Estate in US while
Renato Tayag was appointed as the ancillary administrator of the
properties she left in the Philippines.

A dispute arose between the two as to who between them is

entitled to possess the stock certificates.

A case ensued. The Trial Court ordered CTC-NY to turn over the
stock certificates to Tayag. The CTC-NY refused. Tayag then filed a
Petition to have the said stock certificates be declared lost and to
compel to issue new stock certs. The Petition was granted.

BCI assailed the said. Said stock certs are not actually lost
thereby it is impossible to issue new one.
 ISSUE:

Whether or not the contentions of BCI are correct and new

sec certs cannot be issued by virtue of the BCIs by laws?
 RULING:
No. BCI is incorrect.

BCI is a corporation who owes its existence to the

Philippine laws. It has the rights and privileges under the law.
It has the obligations to follow legal court orders. It is not
immune from judicial orders.

Lawful court order should prevail.

A corporation is a creature without any existence until it

has received the imprimatur of state according to law.
 INTERNATIONAL EXPRESS TRAVEL &
TOURS SERVICES VS CA
Facts:
International Express through its managing director offered its
services as travel agency to Philippine Football Federation thru
its President Henri Kahn. The offer was accepted.

Petitioner secured the airline tickets for the trips of the

athletes in Kuala Lumpur as well as various trips to China and
Brisbane.

Cash and checks were issued as partial payment for the

purchased tickets however, no further payments were made
despite repeated demands.

International Express sued Phil. Football Federation.

 ISSUE:

Whether or not private respondent President Henri Kahn

can be made personally liable for the liabilities of the
Philippines Football Federation.
 RULING:
Yes. A voluntary unincorporated association, like Federation
Football has no power to enter into, or to ratify a contract.

The contract entered into by its officers or agents on behalf of

such association is binding or, as enforceable against it. The
officers or agents are themselves personally liable.

The constitution and by-laws of the Philippine Football

Federation does not prove that the same has indeed been
recognized and accredited.

Philippine Football Federation is not a national sports

association within the purview of the aforementioned laws
and does not have corporate existence of its own.
Private respondent Henri Kahn should be liable for the unpaid
obligations of the unincorporated Philippine Football
Federation

Any person acting or purporting to act on behalf of the

corporation which has no valid existence assumed such
privileges and becomes personally liable for contract entered
into or for other acts performed as such agent.

As president of the Federation, Henri Kahn is presumed to

have known about the corporate existence or non-existence
of the Federation
 CEASE VS CA
Facts:

Forrest Cease and five (5) other American citizens formed Tiaong
Milling and Plantation Company. The shares of the other original
incorporators were bought out by Cease with his children.

Forrest Cease died. There was no mention whether there were

steps to liquidate the company. Some of his children wanted an
actual division while others wanted a reincorporation.

Two of his children, Benjamin and Florence, initiated and asking

that the Tiaong Milling and Plantation Corporation be
declared identical to Forrest Cease and that its properties be
divided among his children as intestate heirs.

Defendants opposed.
 ISSUE:

Whether or not the subject properties owned by

the corporation are also properties of the estate of
Forrest Cease?
 RULING:
Forrest Cease and the registered properties of Tiaong Milling
are actually properties of Forrest L. Cease and should be
divided equally, share and share alike among his six children.

The Board of Directors and stockholders belong to one family

the head of which Forrest L. Cease always retained the
majority stocks and hence the control and management of its
affairs.

There is not even a shadow of a showing that his children

were subscribers or purchasers of the stocks they own. Their
participation as nominal shareholders emanated solely from
Forrest L. Cease's gratuitous dole out of his own shares to the
benefit of his children and ultimately his family.
 SPS. LIPAT VS. PACIFIC BANKING
CORPORATION
Facts:

Sps. Lipat owned Belas Export Trading (BET) a single

proprietorship engaged in the manufacture of garments for
domestic and foreign consumption. The spouses authorized
their daughter to obtain loan from Pacific Bank.

As security, a REM was executed over the property of the

spouses.

BET was incorporated into a family corporation named Belas

Export Corporation (BEC) and the loan was restructured in its
name.
BEC defaulted in its payments leading to the foreclosure and
sale of the mortgaged property.

The spouses moved to annul the sale alleging that BEC is a

distinct and separate personality from them and that the REM
was executed only to secure BETs loan.

Both trial court and CA ruled to pierce the corporate veil to

hold spouses liable for BECs obligations.
 ISSUE:

Whether or not the doctrine of piercing the veil

of corporate fiction is applicable in this case.
 RULING:
BET and BEC are not separate business entities.

Sps. Lipat admitted that they were the owners of BET,

incorporators and majority stockholders of BEC

BET and BEC are one and the same and the latter is a conduit
of and merely succeeded the former.

Petitioner attempt to isolate themselves from and hide behind

the corporate personality of BEC so as to evade their liabilities
to Pacific Bank

BEC is a mere continuation and successor of BET and

petitioners cannot evade their obligations in the mortgage
contract secured under the name of BEC on the pretext that it
was signed for the benefit and under the name of BET
 CIR v. Norton & Harrison Company

Facts:

Plaintiffs filed a collection action against X Corporation.

Upon execution of the court's decision, X Corporation was

found to be without assets.

Thereafter, plaintiffs filed an action against its present and

past stockholder Y Corporation which owned substantially all
of the stocks of X corporation. The two corporations have the
same board of directors and Y Corporation financed the
operations of X corporation.
 ISSUE:

May Y Corporation be held liable for the debts of

X Corporation? Why?
 RULING:
Yes, Y Corporation may be held liable for the debts of X
Corporation. The doctrine of piercing the veil of corporation
fiction applies to this case.

The two corporations have the same board of directors

and Y Corporation owned substantially all of the stocks of X
Corporation, which facts justify the conclusion that the latter
is merely an extension of the personality of the former, and
that the former controls the policies of the latter.

Added to this is the fact that Y Corporation controls the

finances of X Corporation which is merely an adjunct,
business conduit or alter ego of Y Corporation.
 FRANCISCO DE ASIS AND CO. VS. CA
Facts:

Francisco de Asis & Co., Inc. was organized by Francisco de Asis

as its president and Leocadio de Asis as one of the members of
the Board of Directors.

As a stock brokerage company, it did business in the Makati

Stock Exchange wherein one becomes a member upon the
execution of an undertaking by at least 2 members of its Board
of Directors who owned 95% of the outstanding capital stock of
the Francisco de Asis & Co., Inc. executed a joint and several
undertaking wherein they jointly and severally warrant the
equitable payment of all valid and legitimate corporate
liabilities of Francisco de Asis & Co., Inc. in connection with its
membership in the Makati Stock Exchange .
The company thru its President Francisco de Asis approached
Mrs. Mercedes P. Delgado for assistance to secure a loan in the
amount of P200,000.00 from the Resource & Finance
Corporation which Delgado agreed.

Thereafter, Francisco de Asis informed her that he had

P100,000.00 to be made as partial payment of their loan and
suggested that she invest it by buying shares of Philex Mining.

Delgado agreed. Unfortunately, this supposed partial payment

which was to be invested in shares of Philex was not carried
out because Francisco de Asis & Co., Inc. was suspended by
the Makati Stock Exchange from trading, As a result, there was
a rush of claims against the company resulting in its collapse.
 ISSUE:

Whether or not petitioner corporation should be

held liable for the loan obtained by Francisco De
Asis
 RULING:
Yes. The necessity and urgency for the loan of P200,000.00
was not to meet the personal need of Francisco de Asis but to
resolve the cash flow problems of Francisco de Asis and Co.,
Inc.

The record is bereft of any evidence disclosing that said funds

were used other than for corporate purposes.

 JOHN F. MCLEOD VS. NLRC

John F. McLeod filed a complaint against Filipinas Synthetic

Corporation (FILSYN), Far Eastern Textile Mills, Inc., Sta. Rosa
Textiles, Inc. (SRTI), Patricio Lim (President of PMI) and Eric Hu
for

1. retirement benefits
2. 2. vacation and sick leave benefits
3. 3. non-payment of unused airline tickets
4. 4. holiday pay
5. 5. underpayment of salary
6. 6. 13th month pay
7. 7. moral and exemplary damages
8. attorneys fees plus interest
Complainant was the Vice President and Plant Manager of the
plant of Peggy Mills, Inc. (PMI) at Sta. Rosa, Laguna. Peggy Mills
closed operations due to irreversible losses but the corporation
still exists at present.

Filipinas Synthetic Corporation which has controlling interest to

Peggy Mills Inc. sold the same to Far Eastern Textile Mills, Inc. and
this was renamed as Sta. Rosa Textile (SRTI) with Patricio Lim as
Chairman and President. The owners of Far Eastern Textiles
decided for cessation of operations of Sta. Rosa Textiles.

On two occasions, complainant Mcleod wrote letters to Patricio

Lim requesting for his retirement and other benefits. Respondents
offered complainant compromise settlement of only P300,000.00
which complainant rejected.

The Labor Arbiter held all respondents as jointly and solidarily

liable for complainants money claims
NLRC:

reversed and set aside the ruling of the Labor Arbiter and a
new one was entered ordering only respondent Peggy Mills,
Inc. (PMI) to pay the money claims.

CA:

affirmed the decision of the NLRC with modification.

It held Patricio Lim as jointly and solidarily liable with Peggy
Mills, Inc. (PMI) to pay the money claims to McLeod
 ISSUE:

Whether or not Patricio Lim, as President of PMI,

could be held jointly and solidarily liable with PMI.
 RULING:
SC affirmed the decision of CA

On Patricios personal liability, it is settled that in the absence

of malice, bad faith, or specific provision of law, a stockholder
or an officer of a corporation cannot be made personally liable
for corporate liabilities.

A corporation is a juridical entity with legal personality

separate and distinct from those acting for and in its behalf
and, in general, from the people comprising it. The rule is that
obligations incurred by the corporation, acting through its
directors, officers, and employees, are its sole liabilities.
Considering that McLeod failed to prove any of the foregoing
exceptions in the present case, McLeod cannot hold Patricio
solidarily liable with PMI.

There is nothing substantial on record to show that Patricio

acted in bad faith in terminating McLeods services to warrant
Patricios personal liability. PMI had no other choice but to
stop plant operations. The work stoppage therefore was by
necessity. The company could no longer continue with its
plant operations because of the serious business losses that it
had suffered. The mere fact that Patricio was president and
director of PMI is not a ground to conclude that he should be
held solidarily liable with PMI for McLeods money claims.