MANILA INTERNATIONAL AIRPORT AUTHORITY vs. COURT OF APPEALS G.R. No. 155650
July 20, 2006
FACTS: Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport (NAIA) Complex in Parañaque City under Executive Order No. 903, otherwise known as the Revised Charter of the Manila International Airport Authority ("MIAA Charter"). The OGCC opined that the Local Government Code of 1991 withdrew the exemption from real estate tax granted to MIAA under Section 21 of the MIAA Charter. MIAA received Final Notices of Real Estate Tax Delinquency from the City of Parañaque for the taxable years 1992 to 2001. Thereafter, the City of Parañaque, through its City Treasurer, issued notices of levy and warrants of levy on the Airport Lands and Buildings. The Mayor of the City of Parañaque threatened to sell at public auction the Airport Lands and Buildings should MIAA fail to pay the real estate tax delinquency. MIAA filed with the Court of Appeals an original petition for prohibition and injunction, with prayer for preliminary injunction or temporary restraining order. The Court of Appeals dismissed the petition because MIAA filed it beyond the 60-day reglementary period. ISSUE: Whether the Airport Lands and Buildings of MIAA are exempt from real estate tax. HELD: The Court held that MIAA’s Airport Lands and Buildings are exempt from real estate tax imposed by local governments. First, MIAA is not a government owned or controlled corporation but an instrumentality of the National Government and thus exempt from local taxation. Second, the real properties of MIAA are owned by the Republic of the Philippines and thus exempt from real estate tax. There is no dispute that a government-owned or controlled corporation is not exempt from real estate tax. However, MIAA is not a government-owned or controlled corporation. A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation. MIAA is also not a nonstock corporation because it has no members. A non-stock corporation must have members. Even if we assume that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury.This prevents MIAA from qualifying as a non-stock corporation. Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled corporation. MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers. When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers.
MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48, Chapter 12, Book I of the Administrative Code allows instrumentalities like MIAA to hold title to real properties owned by the Republic. Section 234(a) of the Local Government Code exempts from real estate tax any "real property owned by the Republic of the Philippines.” This exemption should be read in relation with Section 133(o) of the same Code, which prohibits local governments from imposing "[t]axes, fees or charges of any kind on the National Government, its agencies and instrumentalities x x x." Section 234(a) of the Local Government Code states that real property owned by the Republic loses its tax exemption only if the "beneficial use thereof has been granted, for consideration or otherwise, to a taxable person." MIAA, as a government instrumentality, is not a taxable person under Section 133(o) of the Local Government Code. Thus, even if we assume that the Republic has granted to MIAA the beneficial use of the Airport Lands and Buildings, such fact does not make these real properties subject to real estate tax. However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt from real estate tax.
Magsaysay-Labrador 180 SCRA 267 19 Fernan, C.J.:
v
Court December
of
Appeals 1989
Facts: Adelaida Rodriguez-Magsaysay, widow and special administratix of the estate of the late senator Genaro Magsaysay, brought before the CFI of Olongapo, an action against Artemio Panganiban, SUBIC, FILMANBANK, and the Register of Deeds of Zambales. She alleged that in 1958, she and her husband acquired through conjugal funds, a parcel of land with improvements, known as “Pequeña Island”; that after the death of her husband, she discovered an annotation at the back of TCT No 3258 that “the land was acquired by her husband from his separate capital”, the Registration of Deed of Assignment purportedly executed by the late Senator in favor of SUBIC was cancelled and TCT No. 22431 issued in the name of SUBIC; and the registration of Deed of Mortgage executed by SUBIC in favor of FILMANBANK; that the foregoing acts were void and done in attempt to defraud conjugal partnership considering that the land is conjugal, her marital consent to the annotation was not obtained. She prayed that the Deed of Mortgage and the Deed of Assignment be annulled and that the Register of Deeds be ordered to cancel TCT No 22431 and to issue a new title in her favor. Herein petitioners, sisters of late senator, filed a Motion for Intervention on the ground that their brother conveyed to them one-half of his shareholdings in SUBIC ad as assignees of around 41% of the total outstanding shares of such stocks in SUBIC. The court denied the Motion for Intervention, and ruled that petitioners have no legal interest. On appeal, the respondent CA found no factual or legal justification to disturb the findings of the lower court. Petitioners strongly argue that their ownership of 41.66% of the entire capital stock of SUBIC entitles them to a significant vote in the corporate affairs; that they are affected by the action of the widow of their late brother for it concerns only tangible assets of the corporation and it appears that they are ore vitally interested in the outcome of the case than SUBIC. Issue: Whether petitioners have legal interest in the subject matter in litigation Ruling: No. Petitioners have no legal interest in the subject matter in litigation so as to entitle them to intervene. As clearly stated in section 2, Rule 12 of the Rules of Court, to be permitted to intervene in a pending action, the party must have legal interest in the matter in litigation. The words “an interest over the subject” mean a direct interest in the cause of action as pleaded and which would put the intervenor in a legal position to litigate a fact alleged in the complaint, without establishment of which plaintiff could not recover. Hence, the interest of petitioner-movants is indirect, contingent, remote, conjectural, consequential, and collateral. At the very least, 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 or dissolution, after payment of the corporate debts and obligations.
While a share of stock represents a proportionate or aliquot interest in the property of the corporation, it does not vest the owner thereof with any legal right or title to any of the property, his interest in the corporate property being equitable or beneficial in nature. Shareholders are in no legal sense the owners of corporate property, which is owned by the corporation as a distinct legal person.
Sulo ng Bayan vs. Araneta [GR L-31061, 17 August 1976] Facts: On 26 April 1966, Sulo ng Bayan, Inc. filed an accion de revindicacion with the Court of First Instance of Bulacan, Fifth Judicial District, Valenzuela, Bulacan, against Gregorio Araneta Inc. (GAI), Paradise Farms Inc., National Waterworks & Sewerage Authority (NAWASA), Hacienda Caretas Inc., and the Register of Deeds of Bulacan to recover the ownership and possession of a large tract of land in San Jose del Monte, Bulacan, containing an area of 27,982,250 sq. ms., more or less, registered under the Torrens System in the name of GAI, et. al.'s predecessors-in-interest (who are members of the corporation). On 2 September 1966, GAI filed a motion to dismiss the amended complaint on the grounds that (1) the complaint states no cause of action; and (2) the cause of action, if any, is barred by prescription and laches. Paradise Farms, Inc. and Hacienda Caretas, Inc. filed motions to dismiss based on the same grounds. NAWASA did not file any motion to dismiss. However, it pleaded in its answer as special and affirmative defenses lack of cause of action by Sulo ng Bayan Inc. and the barring of such action by prescription and laches. On 24 January 1967, the trial court issued an Order dismissing the (amended) complaint. On 14 February 1967, Sulo ng Bayan filed a motion to reconsider the Order of dismissal, arguing among others that the complaint states a sufficient cause of action because the subject matter of the controversy in one of common interest to the members of the corporation who are so numerous that the present complaint should be treated as a class suit. The motion was denied by the trial court in its Order dated 22 February 1967. Sulo ng Bayan appealed to the Court of Appeals. On 3 September 1969, the Court of Appeals, upon finding that no question of fact was involved in the appeal but only questions of law and jurisdiction, certified the case to the Supreme Court for resolution of the legal issues involved in the controversy. Issue: Whether the corporation (non-stock) may institute an action in behalf of its individual members for the recovery of certain parcels of land allegedly owned by said members, among others. Held: It is a doctrine well-established and obtains both at law and in equity that a corporation is a distinct legal entity to be considered as separate and apart from the individual stockholders or members who compose it, and is not affected by the personal rights, obligations and transactions of its stockholders or members. The property of the corporation is its property and not that of the stockholders, as owners, although they have equities in it. Properties registered in the name of the corporation are owned by it as an entity separate and distinct from its members. Conversely, a corporation ordinarily has no interest in the individual property of its stockholders unless transferred to the corporation, "even in the case of a one-man corporation." The mere fact that one is president of a corporation does not render the property which he owns or possesses the property of the corporation, since the
president, as individual, and the corporation are separate similarities. Similarly, stockholders in a corporation engaged in buying and dealing in real estate whose certificates of stock entitled the holder thereof to an allotment in the distribution of the land of the corporation upon surrender of their stock certificates were considered not to have such legal or equitable title or interest in the land, as would support a suit for title, especially against parties other than the corporation. It must be noted, however, that the juridical personality of the corporation, as separate and distinct from the persons composing it, is but a legal fiction introduced for the purpose of convenience and to subserve the ends of justice. This separate personality of the corporation may be disregarded, or the veil of corporate fiction pierced, in cases where it is used as a cloak or cover for fraud or illegality, or to work -an injustice, or where necessary to achieve equity. It has not been claimed that the members have assigned or transferred whatever rights they may have on the land in question to the corporation. Absent any showing of interest, therefore, a corporation, has no personality to bring an action for and in behalf of its stockholders or members for the purpose of recovering property which belongs to said stockholders or members in their personal capacities.
Bataan Shipyard and Engineering Co. (BASECO) Vs Presidential Commission on Good Government (PCGG)
Facts:
BASECO challenges Executive Orders Nos. 1 and 2, promulgated by former President Corazon C. Aquino and the sequestration, takeover, and acts done pursuant to the executive orders by the PCGG.
On the strength on the sequestration order issued by Commissioner Mary Concepcion Bautista, Jose Balde acting for the PCGG addressed a letter to the President and officers of BASECO requesting for the production of certain documents. The letter closed with a warning that if the documents are not submitted within 5 days, the officers would be cited for conptempt.
Petitioner avers that the executive orders are unconstitutional. While BASECO concedes that sequestration without judicial action may be made within the context of the executive orders, however when the Freedom Constitution was promulgated it ceased to be acceptable. This is because the Freedom Constitution adopted the Bill of Rights embodied in the 1973 Constitution. BASECO argues that the assailed order to produce corporate records infringed on their constitutional right against self incrimination and unreasonable searches and seizures.
Issue: Whether or not the right against self incrimination and the right against unreasonable searches and seizures available to BASECO and juridical entity?
Ruling:
The right against self incrimination has no application to juridical persons. While an individual (person) may lawfully refuse to answer incriminating questions, it does not follow that a person vested with special privileges and franchises may refuse to show its hand when charged with abuse of such privileges
The corporation is a creature of the state. It is presumed to be incorporated for the benefit of the public. It received special privileges and franchises and holds them subject to the laws of the state and limitations of its charter.
There is a reserve right on the legislature to investigate its contracts and find out whether it exceeded its powers.
It would be strange to hold that a state having chartered a corporation could not in the exercise of sovereignty inquire how these franchises had been employed and whether they had been abused and demand production of the corporate books for that purpose.
LUXURIA HOMES, INC., and/or AIDA M. POSADAS vs. HONORABLE COURT OF APPEALS, JAMES BUILDER CONSTRUCTION and/or JAIME T. BRAVO G.R. No. 125986.
January 28, 1999
MARTINEZ, J.:
FACTS: Petitioner Aida M. Posadas and her two (2) minor children co-owned property in Muntinlupa, which was occupied by squatters. Petitioner Posadas entered into negotiations with private respondent Jaime T. Bravo regarding the development of the said property into a residential subdivision, authorizing private respondent to negotiate with the squatters to leave the said property. Meanwhile, on December 11, 1989, petitioner Posadas and her two (2) children, through a Deed of Assignment, assigned the said property to petitioner Luxuria Homes, Inc., purportedly for organizational and tax avoidance purposes. Respondent Bravo signed as one of the witnesses to the execution of the Deed of Assignment and the Articles of Incorporation of petitioner Luxuria Homes, Inc. Then sometime in 1992, the harmonious and congenial relationship of petitioner Posadas and respondent Bravo turned sour when the former supposedly could not accept the management contracts to develop the property into a residential subdivision, the latter was proposing. In retaliation, respondent Bravo demanded payment for services rendered in connection with the development of the land, i.e., relocation of squatters, preparation of the architectural design and site development plan, survey and fencing. Petitioner Posadas refused to pay the amount demanded. Thus, private respondents instituted a complaint for specific performance before the trial court against petitioners Posadas and Luxuria Homes, Inc. Private respondents contend that petitioner Posadas surreptitiously formed Luxuria Homes, Inc., and transferred the subject parcel of land to it to evade payment and defraud creditors. ISSUE: Can petitioner Luxuria Homes, Inc., be held liable to private respondents for the transactions supposedly entered into between petitioner Posadas and private respondents? HELD: NO. To disregard the separate juridical personality of a corporation, the wrongdoing must be clearly and convincingly established. It cannot be presumed. The separate personality of the corporation may be disregarded only when the corporation is used as a cloak or cover for fraud or illegality , or to work injustice, or where necessary for the protection of creditors. The issuance of the Articles of Incorporation of the Luxuria Homes and the transfer was made at the time the relationship between the parties was supposedly very pleasant. It cannot be said that the incorporation of Luxuria Homes and the eventual transfer of the subject
property to it were in fraud of private respondents as such were done with the full knowledge of Bravo himself. Besides, Posadas is not the majority stockholder of Luxuria Homes, Inc. as she only owns approximately 33% of the capital stock. Hence cannot be considered as an alter ego of Luxuria Homes, Inc.
[G.R. No. 108734. May 29, 1996]
CONCEPT BUILDERS, INC., petitioner, vs. THE NATIONAL LABOR RELATIONS COMMISSION, (First Division); and Norberto Marabe, Rodolfo Raquel, Cristobal Riego, Manuel Gillego, Palcronio Giducos, Pedro Aboigar, Norberto Comendador, Rogello Salut, Emilio Garcia, Jr., Mariano Rio, Paulina Basea, Aifredo Albera, Paquito Salut, Domingo Guarino, Romeo Galve, Dominador Sabina, Felipe Radiana, Gavino Sualibio, Moreno Escares, Ferdinand Torres, Felipe Basilan, and Ruben Robalos, respondents. FACTS: Petitioner Concept Builders, Inc. is a domestic corporation engaged in construction business and herein private respondents are their laborers, carpenters and riggers. On November 1980, the private respondents were issued by the petitioner, individual termination letters indicating that their services were no longer needed and that the project was already finished. Private respondents later found out that such was not the case and that petitioner engaged the services of a subcontractor. This now led, respondents to file a case with the Labor Arbiter against petitioner for illegal dismissal, unfair labor practices and nonpayment of wages. The Labor Arbiter decided in favor of respondents. An Alias Writ of Execution was issued by the Labor Arbiter directing the sheriff to to execute the decision and a second one for collection of the balance of the judgment award. Such writ was not executed because petitioner stopped its operation. A “break-open order” was sought by the respondents but Dennis Cuyegkeng, the Vice-President of Hydro Pipes Philippines, Inc. (HPPI) filed a third party complaint, alleging that the properties to be auctioned by the sheriff were there’s and not of petitioners. Private respondents then averred that HPPI and Concept Builders are the same and such intervention and defense of HPPI was merely to avoid the performance of Concept Builders’ obligation, as proof they presented the certificates issued by SEC to both corporations. HPPI argued then that they are two distinct and separate entities. NLRC issued the “break-open order” and denied petitioner’s motion for reconsideration, hence this petition. ISSUE: Whether or not there was an intention of the petitioners to evade their liability against private respondents through the intervention of HPPI. HELD: Yes. It is very obvious that the second corporation seeks the protective shield of a corporate fiction whose veil in the present case could, and should, be pierced as it was deliberately and maliciously designed to evade its financial obligation to its employees. The corporate mask may be lifted and the corporate veil may be pierced when a corporation is just but the alter ego of a person or of another corporation. Where badges of fraud exist; where public convenience is defeated; where a wrong is sought to be justified thereby, the corporate fiction or the notion of legal entity should come to naught. The law in these instances will regard the corporation as a mere association of persons and, in case of two corporations, merge them into one. Thus, where a sister corporation is used as a shield to evade a corporation’s subsidiary liability for damages, the corporation may not be heard to say that it has a personality separate and distinct from the other corporation. The piercing of the corporate veil comes into play.
G.R. No. L-23893
October 29, 1968
VILLA REY TRANSIT, INC., plaintiff-appellant, vs. EUSEBIO E. FERRER, PANGASINAN TRANSPORTATION CO., INC. and PUBLIC SERVICE COMMISSION, defendants. EUSEBIO E. FERRER and PANGASINAN TRANSPORTATION CO., INC., defendantsappellants.
FACTS: Jose Villarama was an operator of a bus transportation, under the business name of Villa Rey Transit, pursuant to certificates of public convenience granted him by the Public Service Commission (PSC). He sold the two certificates of public convenience to the Pangasinan Transportation Company, Inc. (Pantranco), with the condition that the seller "shall not for a period of 10 years from the date of this sale, apply for any TPU service identical or competing with the buyer."
Barely three months thereafter, a corporation called Villa Rey Transit, Inc. (Corporation) was organized with Natividad Villarama (wife of Jose) as one of the incorporators including the brother and sister-in-law of Jose. Natividad was also the treasurer of the corporation. The Corporation, bought five certificates of public convenience, forty-nine buses, tools and equipment from one Valentin Fernando. However, the Sheriff of Manila, levied on two of the five certificates of public convenience involved therein, pursuant to a writ of execution issued by the CFI of Pangasinan in a Civil Case in favor of Eusebio Ferrer, the judgment creditor of Valentin Fernando, judgment debtor. A public sale was conducted of the two certificates and Ferrer was the highest bidder. Thereafter, Ferrer sold the two certificates of public convenience to Pantranco.
The Corporation filed a complaint for the annulment of the sheriff's sale of the two certificates of public convenience. Pantranco, on its part, filed a third-party complaint against Jose, alleging that Jose and the Corporation, are one and the same; that Jose and/or the Corporation was disqualified from operating the two certificates by virtue of the agreement between them, which stipulated that Jose "shall not for a period of 10 years apply for any TPU service identical or competing with the buyer."
ISSUE: Whether or not corporation is disqualified from operating the certificates of public convenience since it is merely the alter ego of Jose.
HELD: The evidence has that the finances of the Corporation were manipulated and disbursed as if they were the private funds of Jose, in such a way and extent that Jose appeared to be the actual owner-treasurer of the business without regard to the rights of the stockholders. It also shows that the initial cash capitalization of the corporation was mostly financed by Jose. Further, when the Corporation was in its initial months of operation, Jose purchased and paid with his personal checks Ford trucks for the Corporation. Copies of ledger entries and vouchers also prove that Jose had co-mingled his personal funds and transactions with those made in the name of the Corporation. It appears that Jose supplied the organization expenses and the assets of the Corporation, such as trucks and equipment and that Jose made use of the money of the Corporation and deposited them to his private accounts; and the Corporation paid his personal accounts.
The foregoing circumstances are strong persuasive evidence showing that Jose has been too much involved in the affairs of the Corporation to altogether negative the claim that he was only a part-time general manager. They show beyond doubt that the Corporation is his alter ego. While he was not the Treasurer of the Corporation he admitted not only having held the corporate money but that he advanced and lent funds for the Corporation, and yet there was no Board Resolution allowing it.
Villarama's explanation on the matter of his involvement with the corporate affairs of the Corporation only renders more credible Pantranco's claim that his control over the corporation, especially in the management and disposition of its funds, was so extensive and intimate that it is impossible to segregate and identify which money belonged to whom. The interference of Villarama in the complex affairs of the corporation, and particularly its finances, are much too inconsistent with the ends and purposes of the Corporation law, which, precisely, seeks to separate personal responsibilities from corporate undertakings. It is the very essence of incorporation that the acts and conduct of the corporation be carried out in its own corporate name because it has its own personality.
The doctrine that a corporation is a legal entity distinct and separate from the members and stockholders who compose it is recognized and respected in all cases which are within reason and the law. When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the circumvention of statutes, the achievement or perfection of a monopoly or generally the perpetration of knavery or crime, the veil with which the law covers and isolates the corporation from the members or stockholders who
compose it will be lifted to allow for its consideration merely as an aggregation of individuals.
Upon the foregoing considerations, We are of the opinion, and so hold, that the preponderance of evidence have shown that the Villa Rey Transit, Inc. is an alter ego of Jose Villarama, and that the restrictive clause in the contract entered into by the latter and Pantranco is also enforceable and binding against the said Corporation. For the rule is that a seller or promisor may not make use of a corporate entity as a means of evading the obligation of his covenant. Where the Corporation is substantially the alter ego of the covenantor to the restrictive agreement, it can be enjoined from competing with the covenantee.
Yao, Sr. vs. People of the Philippines G.R. 168306 June 19, 2007 Petitioners are incorporators and officers of MASAGANA GAS CORPORATION, an entity engaged in refilling, sale and distribution of LPG Products. Private respondent Petron Corporation (Petron) and Pilipinas Shell Petroleum Corporation (Shell) are two of largest bulk suppliers and producers of LPG in the Philippines, and their LPG are sold under the marks GASUL and SHELLANE respectively. It was alleged that petitioners are actually producing, selling, offering for sale and/or distributing LPG products using steel cylinders, owned by, and bearing the trademarks and devices of Petron and Shell. The NBI filed applications for search warrant against petitioners and the occupants of the MASAGANA Compound for the alleged violation of the Intellectual Property Code of the Philippines. As a result of the service of search warrants, LPG Cylinders bearing the tradename of Shell and Petron, and trademarks and other devices owned by Shell and Petron, as well as refilling machines, were seized Petitioners moved for the return of the seized item for the properties are owned by MASAGANA as a separate entity ISSUE: WON there is a separate legal entity as to warrant the return of the seized item HELD: NO 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. In other words, the law will not recognize the separate corporate existence if the corporation is being used pursuant to unlawful objectives. Petitioners as directors of MASAGANA, are using the latter in violation of intellectual property rights of Petron and Shell. Thus Petitioners and MASAGANA should be considered as one and the same for liability purposes Even if the separate personality of MASAGANA and petitioners is to be sustained, the effect would be the same. The law does not require that the property to be seized should be owned by the person against whom search warrants is directed. It is sufficient that the person against whom the warrant is directed has control or possession of the property sought to be seized. Even if the properties seized belong to MASAGANA, the seizures pursuant to the warrants are still valid.
G.R. No. 150416
July 21, 2006
SEVENTH DAY ADVENTIST CONFERENCE CHURCH OF SOUTHERN PHILIPPINES, INC., and/or represented by MANASSEH C. ARRANGUEZ, BRIGIDO P. GULAY, FRANCISCO M. LUCENARA, DIONICES O. TIPGOS, LORESTO C. MURILLON, ISRAEL C. NINAL, GEORGE G. SOMOSOT, JESSIE T. ORBISO, LORETO PAEL and JOEL BACUBAS, petitioners, vs. NORTHEASTERN MINDANAO MISSION OF SEVENTH DAY ADVENTIST, INC., and/or represented by JOSUE A. LAYON, WENDELL M. SERRANO, FLORANTE P. TY and JETHRO CALAHAT and/or SEVENTH DAY ADVENTIST CHURCH [OF] NORTHEASTERN MINDANAO MISSION, * Respondents. DECISION CORONA, J.: FACTS: This case involves a lot covered by Bayugan, Agusan del Sur originally owned by Felix Cosio and his wife, Felisa Cuysona. The spouses Cosio donated the land to the South Philippine Union Mission of Seventh Day Adventist Church of Bayugan Esperanza, Agusan (SPUM-SDA Bayugan). The donation was allegedly accepted by one Liberato Rayos, an elder of the Seventh Day Adventist Church, on behalf of the donee. Twenty-one years later, however, the same parcel of land was sold by the spouses Cosio to the Seventh Day Adventist Church of Northeastern Mindanao Mission (SDA-NEMM).Claiming to be the alleged donee’s successors-in-interest, petitioners asserted ownership over the property. This was opposed by respondents who argued that at the time of the donation, SPUM-SDA Bayugan could not legally be a done because, not having been incorporated yet, it had no juridical personality. Neither were petitioners members of the local church then, hence, the donation could not have been made particularly to them. ISSUE: Is the donation valid considering that the Church is not yet incorporated? HELD: We agree with the appellate court that the alleged donation to petitioners was void. Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another person who accepts it. The donation could not have been made in favor of an entity yet inexistent at the time it was made. Nor could it have been accepted as there was yet no one to accept it. The deed of donation was not in favor of any informal group of SDA members but a supposed SPUMSDA Bayugan (the local church) which, at the time, had neither juridical personality nor capacity to accept such gift. Declaring themselves a de facto corporation, petitioners allege that they should benefit from the donation. But there are stringent requirements before one can qualify as a de facto corporation: (a) the existence of a valid law under which it may be incorporated; (b) an attempt in good faith to incorporate; and (c) assumption of corporate powers The filing of articles of incorporation and the issuance of the certificate of incorporation are essential for the existence of a de facto corporation. We have held that an organization not registered with the Securities and Exchange Commission (SEC) cannot be considered a corporation in any concept, not even as a corporation de facto. Petitioners themselves admitted that at the time of the donation, they were not registered with the SEC, nor did they even attempt to organize to comply with legal requirements.
"The de facto doctrine thus effects a compromise between two conflicting public interest[s]—the one opposed to an unauthorized assumption of corporate privileges; the other in favor of doing justice to the parties and of establishing a general assurance of security in business dealing with corporations." Generally, the doctrine exists to protect the public dealing with supposed corporate entities, not to favor the defective or non-existent corporation. In view of the foregoing, petitioners’ arguments anchored on their supposed de facto status hold no water. We are convinced that there was no donation to petitioners or their supposed predecessor-in-interest.
G.R. No. 136448. November 3, 1999.* LIM TONG LIM, petitioner, vs. PHILIPPINE FISHING GEAR INDUSTRIES, INC., respondent. PANGANIBAN, J.: Facts: On behalf of “Ocean Quest Fishing Corporation,” Antonio Chua and Peter Yao purchased fishing nets and floats from the Philippine Fishing Gear Industries, Inc. (herein respondent). They claimed that they were engaged in a business venture with Petitioner Lim Tong Lim, who however was not a signatory to the agreement. The buyers, however, failed to pay; hence, private respondent filed a collection suit against Chua, Yao and Petitioner Lim Tong Lim with a prayer for a writ of preliminary attachment. The suit was brought against the three in their capacities as general partners, on the allegation that “Ocean Quest Fishing Corporation” was a nonexistent corporation as shown by a Certification from the Securities and Exchange Commission. Petitioner contests such liability, insisting that only those who dealt in the name of the ostensible corporation should be held liable. Since his name does not appear on any of the contracts and since he never directly transacted with the respondent corporation, ergo, he cannot be held liable. Issue: Whether petitioner may be held liable for the fishing nets and floats purchased from respondent Held: Yes It is difficult to disagree with the RTC and the CA that Lim, Chua and Yao decided to form a corporation. Although it was never legally formed for unknown reasons, this fact alone does not preclude the liabilities of the three as contracting parties in representation of it. Clearly, under the law on estoppel, those acting on behalf of a corporation and those benefited by it, knowing it to be without valid existence, are held liable as general partners. Technically, it is true that petitioner did not directly act on behalf of the corporation. However, having reaped the benefits of the contract entered into by persons with whom he previously had an existing relationship, he is deemed to be part of said association and is covered by the scope of the doctrine of corporation by estoppel. Unquestionably, petitioner benefited from the use of the nets found inside F/B Lourdes, the boat which has earlier been proven to be an asset of the partnership. He in fact questions the attachment of the nets, because the Writ has effectively stopped his use of the fishing vessel. “Sec. 21. Corporation by estoppel.—All persons who assume to act as a corporation knowing it to be without authority to do so shall be liable as general partners for all debts, liabilities and damages incurred or arising as a result thereof: Provided however, That when any such ostensible corporation is sued on any
transaction entered by it as a corporation or on any tort committed by it as such, it shall not be allowed to use as a defense its lack of corporate personality. “One who assumes an obligation to an ostensible corporation as such, cannot resist performance thereof on the ground that there was in fact no corporation.”
Batch 1 case 13 International Express Travel & Tour vs. CA & Henri Kahn, Philippine Football Federation Facts:
Petitioner is a travel agency of Philippine Football Association. Petitioner secured airline tickets for the athletes and officials of the Federation to the South East Asian Games as well as trips to China and Brisbane. The total cost for the airline tickets amounted to P449,654.83. Several payments were made and A check was personally issued by Henri Kahn, President of the Federation, in the amount of P50,000. Despite these payments, a balance of P265,849.33 remained. As a result, Petitioner sued Henri in his personal capacity and as President, and included the Federation as alternative defendant. RTC of Manila ruled in favor of petitioner while it was reversed on appeal by CA. Hence, this case. Issue: WON the Federation has established corporate personality. Held: No. Before a corporation may acquire juridical personality, the State must give its consent through a special law or general enabling act. RA 3135 and PD 604 merely recognize the existence of national sports associations and the manner by which these entities acquire personality. These laws require accreditation from the Phil. Amateur Athletic Federation and the Dept. of Youth and Sports Development. Unfortunately, private respondent failed to substantiate this. Therefore, a person acting on behalf of a corporation which has no valid existence assumes privileges and becomes personally liable for contracts entered into or acts performed as agent. The doctrine of corporation by estoppel cannot be applied in this case since it only applies to a third party trying to escape liability from which he benefitted. In this case, petitioner is not trying to escape liability from the contract but the one claiming from it.
Batch 1 Case 14 Filipinas Broadcasting Network vs AMEC-BCCM Facts: It started with a radio program titled “Exposé” hosted by Carmelo ‘Mel’ Rima (“Rima”) and Hermogenes ‘Jun’ Alegre (“Alegre”). Exposé is aired every morning over DZRC-AM which is owned by Filipinas Broadcasting Network, Inc. (“FBNI”). “Exposé” is heard over Legazpi City and other places in Bicol. In the morning of 14 and 15 December 1989, Rima and Alegre exposed various alleged complaints from students, teachers and parents against Ago Medical and Educational Center-Bicol Christian College of Medicine (“AMEC”) and its administrators.it was claimed that the broadcasts were defamatory, AMEC and Angelita Ago (“Ago”), as Dean of AMEC’s College of Medicine, filed a complaint for damages against FBNI, Rima and Alegre on 27 February 1990. The complaint further alleged that AMEC is a reputable learning institution. With the supposed exposés, FBNI, Rima and Alegre “transmitted malicious imputations, and as such, destroyed plaintiffs. AMEC and Ago included FBNI as defendant for allegedly failing to exercise due diligence in the selection and supervision of its employees, particularly Rima and Alegre. On 18 June 1990, FBNI, Rima and Alegre,filed an Answer alleging that the broadcasts against AMEC were fair and true. FBNI, Rima and Alegre claimed that they were plainly impelled by a sense of public duty to report the “goings-on in AMECan institution imbued with public interest.” During the presentation of the evidence for the defense, Atty. Edmundo Cea, collaborating counsel of Atty. Lozares, filed a Motion to Dismiss on FBNI’s behalf. The trial court denied the motion to dismiss. Consequently, FBNI filed a separate Answer claiming that it exercised due diligence in the selection and supervision of broadcasters.On 14 December 1992, the trial court rendered a Decision finding FBNI and Alegre liable for libel except Rima. The trial court held that the broadcasts are libelous per se. The trial court rejected the broadcasters’ claim that their utterances were the result of straight reporting because it had no factual basis. The Court of Appeals affirmed the trial court’s judgment with modification. The appellate court made Rima solidarily liable with FBNI and Alegre. The appellate court denied Ago’s claim for damages and attorney’s fees because the broadcasts were directed against AMEC, and not against her. FBNI, Rima and Alegre filed a motion for reconsideration which the Court of Appeals denied. Hence, FBNI filed the petition for review. Issue: WON AMEC IS ENTITLED TO MORAL DAMAGES? Held: A juridical person like AMEC is generally not entitled to moral damages because, unlike a natural person, it cannot experience physical suffering or such sentiments as wounded feelings, serious anxiety, mental anguish or moral shock. The Court of Appeals cites “a corporation may have a good reputation which, if besmirched, may also be a ground for the award of moral damages” is an obiter dictum. Nevertheless, AMEC’s claim for moral damages falls under item 7 of Article 2219 of the Civil Code. This provision expressly authorizes the recovery of moral damages in cases of libel, slander or any other form of defamation. Article 2219(7) does not qualify whether the plaintiff is a natural or juridical person. Therefore, a juridical person such as a corporation can validly complain for libel or any other form of defamation and claim for moral damages. Moreover, where the broadcast is libelous per se, the law implies damages. In such a case, evidence of an honest mistake or the want of character or reputation of the party libeled goes only in mitigation of damages. Neither in such a case is the plaintiff required to introduce evidence of actual damages as a condition precedent to the recovery of some damages. In this case, the broadcasts are libelous per se. Thus, AMEC is entitled to moral damages.
Coastal Pacific Trading, Inc. vs. Southern Rolling Mills Co. G.R. No. 118692 July 28, 2006 FACTS: Respondent Southern Rolling Mills Co., Inc. was organized in 1959 for the purpose of engaging in a steel processing business. It was later renamed Visayan Integrated Steel Corporation (VISCO). In 1961, VISCO obtained a loan from DBP amounting to P836,000. It was secured by a Real Estate Mortgage covering VISCO's 3 parcels of land including the machinery and equipment therein. A second loan was then entered by VISCO with respondent banks ( referred as "Consortium") to finance its importation for various raw materials. VISCO executed a second mortgage over the previous properties mentioned, however they were unrecorded. VISCO was unable to pay its second mortgage with the consortium, which resulted in the latter acquiring 90% of the equity of VISCO giving the Consortium the control and management of VISCO. Despite the acquisition, VISCO still remained indebted to the Consortium. Between 1964 to 1965, VISCO entered a processing agreement with Coastal wherein Coastal delivered 3,000 metric tons of hot rolled steel coils which VISCO would process into block iron sheets. However, VISCO was only able to return 1,600 metric tons of those sheets. To pay its first mortgage with DBP, VISCO sold 2 of its generators to FILMAG Phils, Inc. DBP executed a Deed of Assignment of the mortgage in favor of the consortium. The Consortium foreclosed the mortgage and was the highest bidder in an auction sale of VISCO's properties. The Consortium later sold the properties in favor of National Steel Corporation. Coastal files a civil action for Annulment or Rescission of Sale, Damages with Preliminary Injunction. Coastal imputes bad faith on the action of the Consortium, the latter being able to sell the properties of VISCO despite the attachment of the properties, placing them beyond the reach of VISCO's other creditors. The lower court ruled in favor of VISCO, declaring the sale valid and legal. The CA affirmed this. ISSUE 1: Whether the consortium disposed VISCO's assets in fraud of creditors? HELD: Yes. What the consortium did was to pay to them the proceeds from the sale of the generator sets which in turn they used to pay DBP. Due to the Deed of Assignment issued by DBP, the respondent banks recovered what they remitted to DBP & it allowed the Consortium to acquire DBP's primary lien on the mortgaged properties. Allowing them as unsecured creditors ( as the mortgage was unrecorded) to foreclose on the assets of the corporation without regard to inferior claims ISSUE 2: Whether petitioner is entitled to moral damages? No. As a rule, a corporation is not entitled to moral damages because, not being a natural person, it cannot experience physical suffering or sentiments like wounded
feelings, serious anxiety, mental anguish and moral shock. The only exception to this rule is when the corporation has a good reputation that is debased, resulting in its humiliation in the business realm. In the present case, the records do not show any evidence that the name or reputation of petitioner has been sullied as a result of the Consortium's fraudulent acts. Accordingly, moral damages are not warranted. Petitioner was able to recover exemplary damages
