38.

DATU TAGORANAO BENITO vs SECURITIES AND EXCHANGE COMMISSION and JAMIATUL

PHILIPPINE-AL ISLAMIA, INC., respondents.

FACTS:

 February 6, 1959: Articles of Incorporation (AIC) of Jamiatul Philippine-Al Islamia, Inc. (Jamiatul) (originally

Kamilol Islam Institute, Inc.) were filed with the SEC
 December 14, 1962: approved AIC
 The corporation had an authorized capital stock of P200K divided into 20K shares at a par value of P10 each. Of
the authorized capital stock, 8,058 shares worth P80,580.00 were subscribed and fully paid for
 Datu Tagoranao Benito subscribed to 460 shares worth P4,600
 October 28, 1975: filed a certificate of increase of its capital stock from P200K to P1M
 November 25, 1975: stockholders meeting was held were P191,560.00 worth of shares were represented
 P110,980 worth of shares were subsequently issued by the corporation from the unissued portion of the
authorized capital stock of P200,000
 Of the increased capital stock of P1M0, P160K worth of shares were subscribed by Mrs. Fatima A. Ramos, Mrs.
Tarhata A. Lucman and Mrs. Moki-in Alonto.
 November 18, 1976: Datu Tagoranao filed with SEC a petition alleging that the additional issue (worth P110,980)
was made in violation of his pre-emptive right to said additional issue and that the increase in the authorized capital
stock was illegal considering that the stockholders of record were not notified of the meeting wherein the proposed
increase was in the agenda
 SEC: 
 issuance by the corporation of its unissued shares was validly made and was not subject to the pre-
emptive rights of stockholders
 directed Jamiatul to allow petitioner to subscribe thereto, at par value, proportionate to his present
shareholdings, adding thereto the 2,540 shares transferred to him by Mr. Domocao Alonto and Mrs. Moki-in Alonto
ISSUES: 
1. W/N the issuance of the P110,980 of authorized capital stock of P200,000 is in violation of pre-emptive right -
NO
2. W/N the issuance of the increase in the authorized capital stock is in violation of pre-emptive right
HELD: Dismissed for lack of merit
1. NO
 GR: pre-emptive right is recognized only with respect to new issue of shares, and not with respect to additional
issues of originally authorized shares
 Theory: when a corporation at its inception offers its first shares, it is presumed to have offered all of
those which it is authorized to issue
 original subscriber is deemed to have taken his shares knowing that they form a definite
proportionate part of the whole number of authorized shares
 When the shares left unsubscribed are later re-offered, he cannot therefore claim a dilution of
interest.
     2.  NO
 stockholders' meeting was held which included the increase of its capital stock from P200,000.00 to
P1,000,000.00 
 he was not notified of said meeting and that he never attended the same as he was out of the country at the
time
 administrative bodies will not be interfered with by the courts in the absence of grave abuse of discretion on the
part of said agencies, or unless the aforementioned findings are not supported by substantial evidence
39.
40. FILIPINAS PORT SERVICES, INC vs. GO G.R. No. 161886 March 16, 2007

FACTS: FilPort is a domestic corporation engaged in stevedoring services with principal office
in Davao City. On 4 September 1992, petitioner Eliodoro Cruz, Filport’s president from 1968
until he lost his bid for re-election as Filport’s president during the general stockholders’ meeting
in 1991, wrote a letter to the corporation’s Board of Directors questioning the board’s creation of
the positions of Assistant Vice-Presidents for Corporate Planning, Operations, Finance and
Administration, and the creation of the additional positions of Special Assistants to the President
and the Board Chairman with a monthly remuneration of P13,050.00 each, and the election
thereto of certain members of the board. In his aforesaid letter, Cruz requested the board to
take necessary action/s to recover from those elected the salaries they have received. However,
it was not shown on the records that action was taken. On 14 June 1993, Cruz, purportedly in
representation of Filport and its stockholders, among which is herein co-petitioner Mindanao
Terminal and Brokerage Services, Inc., filed with the SEC a petition which he describes as a
derivative suit against the herein respondents who were then the incumbent members of
Filport’s Board of Directors, for alleged acts of mismanagement detrimental to the interest of the
corporation and its shareholders at large. With the enactment of R.A. No. 8799, the case was
first turned over to the RTC of Manila, Branch 14, sitting as a corporate court. Thereafter, on
respondents’ motion, it was eventually transferred to the RTC of Davao City. On 10 December
2001, RTC-Davao City rendered its decision in the case. Even as it found that (1) Filport’s
Board of Directors has the power to create positions not provided for in the by-laws of the
corporation since the board is the governing body; and (2) the increases in the salaries of the
board chairman, vice-president, treasurer and assistant general manager are reasonable, the
trial court nonetheless rendered judgment against the respondents by ordering the directors
holding the positions of Assistant Vice President for Corporate Planning, Special Assistant to
the President and Special Assistant to the Board Chairman to refund to the corporation the
salaries they have received as such officers "considering that Filipinas Port Services is not a big
corporation requiring multiple executive positions" and that said positions "were just created for
accommodation." On appeal, the CA taking exceptions to the findings of the trial court that the
creation of the positions of Assistant Vice President for Corporate Planning, Special Assistant to
the President and Special Assistant to the Board Chairman was merely for accommodation
purposes, granted the respondents’ appeal, reversed and set aside the appealed decision of the
trial court and accordingly dismissed the so-called derivative suit filed by Cruz, et al. Hence this
petition for review on certiorari.

ISSUE: Whether or not Filport’s Board of Directors has the power to create positions not
provided for in the by-laws of the corporation.

RULING: The governing body of a corporation is its board of directors. Section 23 of the
Corporation Code explicitly provides that unless otherwise provided therein, the corporate
powers of all corporations formed under the Code shall be exercised, all business conducted
and all property of the corporation shall be controlled and held by a board of directors. Thus,
with the exception only of some powers expressly granted by law to stockholders (or members, in case of non-stock
corporations), the board of directors (or trustees, in case of non-stock Corporations) has the sole authority to determine
policies, enter into contracts, and conduct the
ordinary business of the corporation within the scope of its charter, i.e., its articles of
incorporation, by-laws and relevant provisions of law. Verily, the authority of the board of
directors is restricted to the management of the regular business affairs of the corporation,
unless more extensive power is expressly conferred.
The raison d’etre behind the conferment of corporate powers on the board of directors is not lost
on the Court. Indeed, the concentration in the board of the powers of control of corporate
business and of appointment of corporate officers and managers is necessary for efficiency in
any large organization. Stockholders are too numerous, scattered and unfamiliar with the
business of a corporation to conduct its business directly. And so the plan of corporate
organization is for the stockholders to choose the directors who shall control and supervise the
conduct of corporate business.
In the present case, the board’s creation of the positions of Assistant Vice Presidents for
Corporate Planning, Operations, Finance and Administration, and those of the Special
Assistants to the President and the Board Chairman, was in accordance with the regular
business operations of Filport as it is authorized to do so by the corporation’s by-laws, pursuant
to the Corporation Code.
Amended Bylaws of Filport provides the following:
Officers of the corporation, as provided for by the by-laws, shall be elected by the board
of directors at their first meeting after the election of Directors. xxx
The officers of the corporation shall be a Chairman of the Board, President, a Vice-
President, a Secretary, a Treasurer, a General Manager and such other officers as the
Board of Directors may from time to time provide, and these officers shall be elected to
hold office until their successors are elected and qualified. (Emphasis supplied.)
Unfortunately, the bylaws of the corporation are silent as to the creation by its board of directors
of an executive committee. Under Section 35 of the Corporation Code, the creation of an
executive committee must be provided for in the bylaws of the corporation. Notwithstanding the
silence of Filport’s bylaws on the matter, the creation of the executive committee by the board of
directors cannot be ruled as illegal or unlawful. One reason is the absence of a showing as to
the true nature and functions of said executive committee considering that the "executive
committee," referred to in Section 35 of the Corporation Code which is as powerful as the board
of directors and in effect acting for the board itself, should be distinguished from other
committees which are within the competency of the board to create at anytime and whose
actions require ratification and confirmation by the board. Another reason is that, ratiocinated by
both the 2 courts below, the Board of Directors has the power to create positions not provided
for in Filport’s bylaws since the board is the corporation’s governing body, clearly upholding the
power of its board to exercise its prerogatives in managing the business affairs of the
corporation.
41.

42. ASSET PRIVATIZATION TRUST VS COURT OF APPEALS

FACTS:

Pursuant to a Mortgage Trust Agreement, the Development Bank of the Philippines and the Philippine National Bank
foreclosed the assets of the Marinduque Mining and Industrial Corporation. The assets were sold to Philippine National
Bank and later transferred to the Asset Privatization Trust (APT).
In February 1985, Jesus Cabarrus, Sr., together with other stockholders of Marinduque Mining and Industrial Corporation,
filed a derivative suit against Development Bank of the Philippines and Philippine National Bank before the Regional
Trial Court of Makati for Annulment of Foreclosures, Specific Performance and Damages. In the course of the trial,
Marinduque Mining and Industrial Corporation and Asset Privatization Trust as successor in interest of Development
Bank of the Philippines and Philippine National Bank, agreed to submit the case to arbitration by entering into a
Compromise and Arbitration Agreement. This agreement was approved by the trial court and the complaint was
corollarily dismissed.
Thereafter, the Arbitration Committee rendered a decision ordering Asset Privatization Trust to pay Marinduque Mining
and Industrial Corporation damages and arbitration costs in the amount of P2.5 Billion, P13,000,000.00 of which is for
moral and exemplary damages.
On motion of Cabarrus and the other stockholders of Marinduque Mining and Industrial Corporation, the trial court
confirmed the Arbitration Committee’s award. Its motion for reconsideration having been denied, Asset Privatization
Trust filed a special civil action for certiorari with the Court of Appeals. It was likewise denied.
Hence, this petition for review on certiorari.
ISSUE:

Whether or not the Marinduque Mining and Industrial Corporation is entitled to moral damages?
HELD:

No. How could the MMIC be entitled to a big amount of moral damages when its credit reputation was not exactly
something to be considered sound and wholesome. Under Article 2217 of the Civil Code, moral damages include
besmirched reputation which a corporation may possibly suffer. A corporation whose overdue and unpaid debts to the
Government alone reached a tremendous amount of P22 Billion Pesos cannot certainly have a solid business reputation to
brag about.
Besides, it is not yet a well settled jurisprudence that corporations are entitled to moral damages. While the Supreme
Court may have awarded moral damages to a corporation for besmirched reputation in Mambulao vs. PNB, 22 SCRA 359,
such ruling cannot find application in this case. It must be pointed out that when the supposed wrongful act of foreclosure
was done, MMIC’s credit reputation was no longer a desirable one. The company then was already suffering from serious
financial crisis which definitely projects an image not compatible with good and wholesome reputation. So it could not be
said that there was a “reputation” besmirched by the act of foreclosure.
As a rule, a corporation exercises its powers, including the power to enter into contracts, through its board of directors.
While a corporation may appoint agents to enter into a contract in its behalf, the agent should not exceed his authority. 54
In the case at bar, there was no showing that the representatives of PNB and DBP in MMIC even had the requisite
authority to enter into a debt-for-equity swap. And if they had such authority, there was no showing that the banks,
through their board of directors, had ratified the FRP.
WHEREFORE, the petition is GRANTED.
43.  Go v. Distinction Properties Development and Construction, Inc.G.R. No. 194024 
44. Chua vs. CA Case Digest
Chua vs. Court of Appeals
[GR 150793, 19 November 2004]

Facts: On 28 February 1996, Lydia Hao, treasurer of Siena Realty Corporation, filed a complaint-affidavit with
the City Prosecutor of Manila charging Francis Chua and his wife, Elsa Chua, of four counts of falsification of
public documents pursuant to Article 172[3] in relation to Article 171[4] of the Revised Penal Code. The charge
reads: "That on or about May 13, 1994, in the City of Manila, Philippines, the said accused, being then a
private individual, did then and there willfully, unlawfully and feloniously commit acts of falsification upon a
public document, to wit: the said accused prepared, certified, and falsified the Minutes of the Annual
Stockholders meeting of the Board of Directors of the Siena Realty Corporation, duly notarized before a Notary
Public, Atty. Juanito G. Garcia and entered in his Notarial Registry as Doc No. 109, Page 22, Book No. IV and
Series of 1994, and therefore, a public document, by making or causing it to appear in said Minutes of the
Annual Stockholders Meeting that one LYDIA HAO CHUA was present and has participated in said
proceedings, when in truth and in fact, as the said accused fully well knew that said Lydia C. Hao was never
present during the Annual Stockholders Meeting held on April 30, 1994 and neither has participated in the
proceedings thereof to the prejudice of public interest and in violation of public faith and destruction of truth as
therein proclaimed. Contrary to Law." 

Thereafter, the City Prosecutor filed the Information (Criminal Case 285721) for falsification of public
document, before the Metropolitan Trial Court (MeTC) of Manila, Branch 22, against Francis Chua but
dismissed the accusation against Elsa Chua. Francis Chua, was arraigned and trial ensued thereafter. During
the trial in the MeTC, Atty. Evelyn Sua-Kho and Atty. Ariel Bruno Rivera appeared as private prosecutors and
presented Hao as their first witness. After Hao’s testimony, Chua moved to exclude Hao’s counsels as private
prosecutors in the case on the ground that Hao failed to allege and prove any civil liability in the case. In an
Order, dated 26 April 1999, the MeTC granted Chua’s motion and ordered the complainant’s counsels to be
excluded from actively prosecuting Criminal Case 285721. Hao moved for reconsideration but it was denied.
Hao filed a petition for certiorari (SCA 99-94846), before the Regional Trial Court (RTC) of Manila, Branch 19.
The RTC gave due course to the petition and on 5 October 1999, the RTC in an order reversed the MeTC
Order. Chua moved for reconsideration which was denied. Dissatisfied, Chua filed before the Court of Appeals
a petition for certiorari. On 14 June 2001, the appellate court promulgated its Decision denying the petition.
The Court of Appeals held that the action was indeed a derivative suit, for it alleged that petitioner falsified
documents pertaining to projects of the corporation and made it appear that Chua was a stockholder and a
director of the corporation. According to the appellate court, the corporation was a necessary party to the
petition filed with the RTC and even if Hao filed the criminal case, her act should not divest the Corporation of
its right to be a party and present its own claim for damages. Chua moved for reconsideration but it was denied
in a Resolution dated 20 November 2001. Hence, the petition by Chua. 

Issue: Whether the criminal complaint was in the nature of a derivative suit. 

Held: Under Section 36 of the Corporation Code, read in relation to Section 23, where a corporation is an
injured party, its power to sue is lodged with its board of directors or trustees. An individual stockholder is
permitted to institute a derivative suit on behalf of the corporation wherein he holds stocks in order to protect or
vindicate corporate rights, whenever the officials of the corporation refuse to sue, or are the ones to be sued,
or hold the control of the corporation. In such actions, the suing stockholder is regarded as a nominal party,
with the corporation as the real party in interest. A derivative action is a suit by a shareholder to enforce a
corporate cause of action. The corporation is a necessary party to the suit. And the relief which is granted is a
judgment against a third person in favor of the corporation. Similarly, if a corporation has a defense to an
action against it and is not asserting it, a stockholder may intervene and defend on behalf of the corporation.
Under the Revised Penal Code, every person criminally liable for a felony is also civilly liable. When a criminal
action is instituted, the civil action for the recovery of civil liability arising from the offense charged shall be
deemed instituted with the criminal action, unless the offended party waives the civil action, reserves the right
to institute it separately or institutes the civil action prior to the criminal action. Not every suit filed in behalf of
the corporation is a derivative suit. For a derivative suit to prosper, it is required that the minority stockholder
suing for and on behalf of the corporation must allege in his complaint that he is suing on a derivative cause of
action on behalf of the corporation and all other stockholders similarly situated who may wish to join him in the
suit. It is a condition sine qua non that the corporation be impleaded as a party because not only is the
corporation an indispensable party, but it is also the present rule that it must be served with process. The
judgment must be made binding upon the corporation in order that the corporation may get the benefit of the
suit and may not bring subsequent suit against the same defendants for the same cause of action. In other
words, the corporation must be joined as party because it is its cause of action that is being litigated and
because judgment must be a res adjudicata against it. Herein, the complaint was instituted by Hao against
Chua for falsifying corporate documents whose subject concerns corporate projects of Siena Realty
Corporation. Clearly, Siena Realty Corporation is an offended party. Hence, Siena Realty Corporation has a
cause of action. And the civil case for the corporate cause of action is deemed instituted in the criminal action.
However, the board of directors of the corporation in this case did not institute the action against Chua. Hao
was the one who instituted the action. Nowhere is it stated that she is filing the same in behalf and for the
benefit of the corporation. Thus, the criminal complaint including the civil aspect thereof could not be deemed
in the nature of a derivative suit.

45.
46. REMO VS IAC (A)

Facts:

The Board of Directors of Akron Corporation composed of petitioner Remo, Feliciano Coprada, et al. adopted a
resolution authorizing the purchase of 13 trucks for use in its business. Feliciano Coprada as President and
Chairman of Akron, purchased 13 trucks from respondent E.B. Marcha Transport with a downpayment of
P50,000 and a security by way of promissory note executed by Coprada in favor of Akron. Akron paid rentals a
day but sometime after lapsed in payment. Coprada wrote respondent asking for grace period and eventually
returned the 10 trucks. Respondent filed a complaint for the recovery of the sum or 13 trucks against Akron
and its officers/directors. The trial court and later the IAC found for respondent. Petitioner contends that he
should not be held personally liable for the corporation’s liabilities.

Issue:

Whether or not petitioner may be held personally liable for the corporation’s liabilities.

Ruling: NO.

The environmental facts of this case show that there is no cogent basis to pierce the corporate veil of Akron
and hold petitioner personally liable for its obligation to private respondent. While it is true that petitioner was
still a member of the board of directors of Akron and that he participated in the adoption of a resolution
authorizing the purchase of 13 trucks for the use in the brokerage business of Akron to be paid out of a loan to
be secured from a lending institution, it does not appear that said resolution was intended to defraud anyone
and more particularly private respondent. It was Coprada, President and Chairman of Akron, who negotiated
with said respondent for the purchase of 13 cargo trucks. It was Coprada who signed a promissory note to
guarantee the payment of the unpaid balance of the purchase price out of the proceeds of a loan he
supposedly sought from the DBP. The word “WE’ in the said promissory note must refer to the corporation
which Coprada represented in the execution of the note and not its stockholders or directors. Petitioner did not
sign the said promissory note so he cannot be personally bound thereby.
46. REMO VS IAC (B)
47. PABALAN & LAGDAMEO VS NLRC

Facts:

84 workers of the Philippine Inter-Fashion (PIF) filed a complaint against the latter for illegal transfer
simultaneous with illegal dismissal in violation of the Labor Code. PIF was notified about the complaint and
summons but hearings were continually re-set for failure of its officers (petitioners herein) to appear.
Complainant workers thus moved to implead petitioners as officers of PIF in the complaint for their illegal
transfer to a new firm. The Labor Arbiter ruled in favor of workers holding petitioners-officers jointly and
severally liable with PIF to pay them their benefits. Petitioners’ appeal was dismissed.

Issue:

Whether or not petitioners as officers may be held jointly and severally liable with the corporation for its liability.

Ruling: NO.

The settled rule is that the corporation is vested by law with a personality separate and distinct from the
persons composing it, including its officers as well as from that of any other legal entity to which it may be
related. Thus, a company manager acting in good faith within the scope of his authority in terminating the
services of certain employees cannot be held personally liable for damages. However, the legal fiction that a
corporation has a personality separate and distinct from stockholders and members may be disregarded when
the notion of legal entity is used as a means to perpetrate fraud or an illegal act or as a vehicle for the evasion
of an existing obligation, the circumvention of statutes, and or (to) confuse legitimate issues the veil which
protects the corporation will be lifted.

In this particular case complainants did not allege or show that petitioners, as officers of the corporation
deliberately and maliciously designed to evade the financial obligation of the corporation to its employees, or
used the transfer of the employees as a means to perpetrate an illegal act or as a vehicle for the evasion of
existing obligations, the circumvention of statutes, or to confuse the legitimate issues.
Not one of the above circumstances has been shown to be present. Hence petitioners cannot be held jointly
and severally liable with the PIF corporation under the questioned decision and resolution of the public
respondent.

48. UMALI VS CA

Facts: Plaintiff Santiago Rivera is the nephew of plaintiff Mauricia Mur Vda. de Castillo. The Castillo family are the
owners of parcel of land located in Lucena City which was given as security for a loan from the development Bank of the
Philippines (DBP) for their failure to pay the amortization, foreclosure of the said property was about to be initiated. This
problem was made known to Santiago Rivera, who proposed to them the conversion into subdivision of the four parcels of
land adjacent to the mortgaged property to raise the necessary fund. The idea was accepted by the Castillo family and to
carry out the project, a memorandum of agreement was executed by and between Slobec Realty and Development Inc.
represented by its president Santiago Rivera and Castillo family. In this agreement, Santiago Rivera obliged himself to
pay the Castillo family the sum of P70,000 immediately after the execution of the agreement and to pay additional amount
of P40,000 after the property has been converted into a subdivision. Rivera, with agreement approached Mr. Modesto
Cervantes, president of defendant Bormaheco and proposed to purchase from Bormaheco two tractors model D7 and D8
subsequently a sales agreement was executed on December 28, 1970. On January 3, 1971, Slobec, through Rivera,
executed in favor of Bormaheco a chattel mortgage over the said equipment as security for the payment of the aforesaid
balance of P180,000. As further security of the aforementioned unpaid balance, Slobec obtained from insurance
corporation of the Philippines a security bond, with Insurance Corporation of the Philippines (ICP) as surety and Slobec as
principal, in favor of Bormaheco, as borne out of by Exhibit 8. The aforesaid surety bond was in turn secured by an
agreement of counter-guaranty with real estate mortgage executed by Rivera as President of Slobec and Mauricia Mur
Vda. de Castillo, Buenaflor Castillo Umali, Bertilla Castillo-Rada, Victoria Castillo, Marietta Castillo and Leovina
Castillo Jalbuena as mortgagors and insurance corporation of the Philippines as mortgagee. In this agreement, ICP
guaranteed the obligation of Slobec with Bormaheco in the amount of P180,000. In giving the bond, ICP required that the
Castillos mortgage to them the properties in question, namely, four parcels of land covered by TCT in the name of the
aforementioned mortgagors, namely TCT no. 13114, 13115, 13116, and 13117 all of the Register of Deeds of Lucena
City. Meanwhile, for violation of the terms and conditions of the counter-guaranty agreement, the properties of the
Castillos were foreclosed by ICP as the highest bidder with a bid of P285,212, a certificate of sale was issued by the
provincial sheriff of Lucena City and TCT over the subject parcels of land were issued.

Issue: Whether or not the foreclosure is proper so as to apply the doctrine of piercing the veil of corporate entity.

Held: No. Under the doctrine of piercing the veil of corporate entity, when valid grounds therefore exists, the legal fiction
that a corporation is an entity with a juridical personality separate and distinct from its members or stockholders may be
disregarded. In such cases, the corporation will be considered as a mere association of persons. The members or
stockholders of the corporation will be considered as the corporation, that is, liability will attach directly to the officers
and stockholders. The doctrine applies when the corporate fiction is used to defeat public convenience, justify wrong,
protect fraud, or defend crime, on when it is made as a shield to confuse the legitimate issues or where a corporation is the
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.

In the case at bar, petitioners seek to pierce the veil of corporate entity of Bormaheco, ICP and PM parts, alleging that
these corporations employed fraud in causing the foreclosure and subsequent sale of the real properties belonging to
petitioners while we do not discount the possibility of existence of fraud in the foreclosure proceeding, neither are we
inclined to apply the doctrine invoked by petitioners in granting the relief sought. It is our considered opinion that piercing
the veil of corporate entity is not the proper remedy in order that the foreclosure proceeding may be declared a nullity
under the circumstances obtaining in the legal case at bar.
The mere fact, therefore, that the business of two or more corporations are interrelated is not a justification for
disregarding their separate personalities, absent sufficient showing that the corporate entity was purposely used as a shield
to defraud creditors and third persons of their rights.

49. INDOPHIL TEXTILE MILL WORKERS UNION VS TEODORICO CALICA

FACTS OF THE CASE

In April, 1987, petitioner Indophil Textile Mill Workers Union-PTGWO and private respondent Indophil Textile
Mills, Inc. executed a collective bargaining agreement effective from April 1, 1987 to March 31, 1990.
Meanwhile,Indophil Acrylic Manufacturing Corporation was formed and registered with the Securities and
Exchange Commission. Subsequently, Acrylic applied for registration with the Board of Investments for
incentives under the 1987 Omnibus Investments Code. The application was approved on a preferred non-
pioneer status. In 1988, Acrylic became operational and hired workers according to its own criteria and
standards. Sometime in July, 1989, the workers of Acrylic unionized and a duly certified collective bargaining
agreement was executed. In 1990 or a year after the workers of Acrylic have been unionized and a CBA
executed, the petitioner union claimed that the plant facilities built and set up by Acrylic should be considered
as an extension or expansion of the facilities of private respondent Company pursuant to Section 1(c), Article I
of the CBA, to wit,. c) This Agreement shall apply to the Company's plant facilities and installations and to any
extension and expansion thereat.
In other words, it is the petitioner's contention that Acrylic is part of the Indophil bargaining unit.
The petitioner's contention was opposed by private respondent which submits that it is a juridical entity
separate and distinct from Acrylic. Voluntary Arbitrator ruled in favor of Indophil.

ISSUE
Whether Indophil Acrylic is a separate and distinct entity from respondent company for purposes of union
representation.

RULING
Yes. Under the doctrine of piercing the veil of corporate entity, when valid grounds therefore exist, the legal
fiction that a corporation is an entity with a juridical personality separate and distinct from its members or
stockholders may be disregarded. In such cases, the corporation will be considered as a mere association of
persons. The members or stockholders of the corporation will be considered as the corporation that is liability
will attach directly to the officers and stockholders. The doctrine applies when the corporate fiction is used to
defeat public convenience, justify wrong, protect fraud, or defend crime, or when it is made as a shield to
confuse the legitimate issues, or where a corporation is the 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.
In the case at bar, petitioner seeks to pierce the veil of corporate entity of Acrylic, alleging that the creation of
the corporation is a devise to evade the application of the CBA between petitioner Union and private
respondent Company. While we do not discount the possibility of the similarities of the businesses of private
respondent and Acrylic, neither are we inclined to apply the doctrine invoked by petitioner in granting the relief
sought. The fact that the businesses of private respondent and Acrylic are related, that some of the employees
of the private respondent are the same persons manning and providing for auxiliary services to the units of
Acrylic, and that the physical plants, offices and facilities are situated in the same compound, it is our
considered opinion that these facts are not sufficient to justify the piercing of the corporate veil of Acrylic.
Hence, the Acrylic not being an extension or expansion of private respondent, the rank-and-file employees
working at Acrylic should not be recognized as part of, and/or within the scope of the petitioner, as the
bargaining representative of private respondent.

50. BOYER-ROXAS VS CA

FACTS OF THE CASE

When Eugenia V. Roxas died, her heirs formed a corporation under the name and style of Heirs of Eugenia V.
Roxas, Inc. using her estate as the capital of the corporation, the private respondent herein. It was primarily
engaged in agriculture business, however it amended its purpose to enable it to engage in resort and
restaurant business. Petitioners are stockholders of the corporation and two of the heirs of Eugenia. By
tolerance, they were allowed to occupy some of the properties of the corporation as their residence. However,
the board of directors of the corporation passed a resolution evicting the petitioners from the property of the
corporation because the same will be needed for expansion.
At the RTC, private respondent presented its evidence averring that the subject premises are owned by the
corporation. Petitioners failed to present their evidence due to alleged negligence of their counsel. RTC
handed a decision in favor of private respondent.
Petitioners appealed to the Court of Appeals but the latter denied the petition and affirmed the ruling of the
RTC. Hence, they appealed to the Supreme Court. In their appeal, petitioners argues that the CA made a
mistake in upholding the decision of the RTC, and that their occupancy of the subject premises should be
respected because they own an aliquot part of the corporation as stockholders, and that the veil of corporate
fiction must be pierced by virtue thereof.

ISSUE
1. Whether petitioner’s contention were correct as regards the piercing of the corporate veil.
2. Whether petitioners were correct in their contention that they should be respected as regards their
occupancy since they own an aliquot part of the corporation.

RULING
1.Petitioner’s contention to pierce the veil of corporate fiction is untenable. As aptly held by the court: “..The
separate personality of a corporation may ONLY be disregarded when the corporation is used as a cloak or
cover for fraud or illegality, or to work injustice, or when necessary to achieve equity or when necessary for the
protection of creditors.”
2. As regards petitioners contention that they should be respected on their occupancy by virtue of an aliquot
part they own on the corporation as stockholders, it also fails to hold water. The court held that “properties
owned by a corporation are owned by it as an entity separate and distinct from its members. While shares of
stocks are personal property, they do not represent property of the corporation. A share of stock only typifies
an aliquot part of the corporation’s property, or the right to share in its proceeds to that extent when distributed
according to law and equity, but its holder is not the owner of any part of the capital of the corporation. Nor is
he entitled to the possession of any definite portion of its property or assets. The holder is not a co-owner or a
tenant in common of the corporate property.”