Chapter 4 - Corporate Entity Flashcards
(43 cards)
Stockholders of Guanzon v. Register of Deeds
Since the purpose of the liquidation, as well as the distribution of the assets of the corporation, is to transfer their title from the corporation to the stockholders in proportion to their shareholdings, — and this is in effect the purpose which they seek to obtain from the Register of Deeds of Manila, — that transfer cannot be effected without the corresponding deed of conveyance from the corporation to the stockholders.
It is, therefore, fair and logical to consider the certificate of liquidation as one in the nature of a transfer or conveyance
Caram v. CA
There was no showing that the Filipinas Orient Airways was a fictitious corporation and did not have a separate juridical personality, to justify making the petitioners, as principal stockholders thereof, responsible for its obligations. As a bona fide corporation, the Filipinas Orient Airways should alone be liable for its corporate acts as duly authorized by its officers and directors.
Palay v. Clave (1983)
GENERAL RULE: A corporation may not be made to answer for acts or liabilities of its stockholders or those of the legal entities to which it may be connected and vice versa.
EXCEPTION: However, the veil of corporate fiction may be pierced when it is used:
- as a shield to further an end subversive of justice;
- or for purposes that could not have been intended by the law that created it;
- or to defeat public convenience, justify wrong, protect fraud, or defend crime;
- or to perpetuate fraud or confuse legitimate issues;
- or to circumvent the law or perpetuate deception;
- or as an alter ego, adjunct or business conduit for the sole benefit of the stockholders.
Tramat Mercantile v. CA (1994)
Personal liability of a corporate director, trustee or officer along (although not necessarily) with the corporation may so validly attach, as a rule, only when:
(1) He assents
(a) to a patently unlawful act of the corporation, or
(b) for bad faith, or
(c) for conflict of interest, resulting in damages to the corporation, its stockholders or other persons;
(2) He consents to the issuance of watered stocks or who, having knowledge thereof, does not forthwith file with the corporate secretary his written objection thereto;
(3) He agrees to hold himself personally and solidarily liable with the corporation; or
(4) He is made, by a specific provision of law, to personally answer for his corporate action.
Marvel Bldg. v. David (1954)
Based on the circumstantial evidence presented, the other stockholders only served as dummies of Mrs. Castro and the latter was, in actuality, the sole and exclusive owner of all the shares of stock of MBC. Thus, the corporate fiction in this case was disregarded, as the corporation was used to evade taxes - the stockholder, Mrs. Castro became personally liable, and not the corporation.
Palacio v. Fely Transpo (1962)
Isabelo Calingasan and defendant Fely Transportation may be regarded as one and the same person. It is evident that Isabelo Calingasan’s main purpose in forming the corporation was to evade his subsidiary civil liability resulting from the conviction of his driver, Alfredo Carillo. This conclusion is borne out by the fact that the incorporators of the Fely Transportation are Isabelo Calingasan, his wife, his son, Dr. Calingasan, and his two daughters. Furthermore, the failure of the defendant corporation to prove that it has other property than the jeep strengthens the conviction that its formation was for the purpose above indicated.
NAMARCO v. Associated (1967)
The Court found that Sycip is guilty of fraud. Through false representations, he succeeded in inducing NAMARCO to enter into the exchange agreement, with full knowledge, on his part of the fact that ASSOCIATED was in no position to comply with the obligation it had assumed. Consequently, he cannot seek refuge behind the doctrine of separate legal entity.
Tan Boon Bee v. Jarencio (1988)
Evidence shows that PADCO was never engaged in the printing business; that the BOD and the officers of Graphic and PADCO were the same; and that PADCO holds 50% of the shares of stock of Graphic. PADCO’s own evidence shows that the machine in question had been in the premises of Graphic since May 1965, long before PADCO even acquired its alleged title
Magsaysay Labrador v. CA (1989)
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.
A transfer must be registered in the books of the corporation to affect third persons.
Indo-Phil v. Calica (1992)
The legal corporate entity is disregarded only if it is sought to hold the officers and stockholders directly liable for a corporate debt or obligation. (Umali v. CA). In the instant case, petitioner does not seek to impose a claim against the members of the Acrylic. They wanted to pierce it to largen their BU.
Jacinto v. CA (1991)
While on the face of the complaint there is no specific allegation that the corporation is a mere alter ego of petitioner, subsequent developments, from the stipulation of facts up to the presentation of evidence and the examination of witnesses, unequivocally show that respondent Metropolitan Bank and Trust Company sought to prove that petitioner and the corporation are one or that he is the corporation.
Alter ego doctrine
Where one corporation is so organized and controlled and its affairs are conducted so that it is, in fact, a mere instrumentality or adjunct of the other, the fiction of the corporate entity of the ‘instrumentality’ may be disregarded.
Control (Concept Builders, 1996)
- Complete domination of finances, and policy and business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own
- Control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positive legal duty, or dishonest and unjust act in contravention of plaintiff’s legal rights; AND
- The control and breach of duty must proximately cause the injury or unjust loss complained of.
Claparols v. CIR (1975)
This avoiding-the-liability scheme is very patent, considering that 90% of the subscribed shares of stocks of the Claparols Steel Corp (the second corp) was owned by petitioner Claparols himself, and all the assets of the dissolved Claparols Steel and Nail Plant were turned over to the emerging Claparols Steel Corp.
Villa Rey Transit v. Ferrer (1968)
held that the Villa Rey Transit, Inc. is an alter ego of Jose M. Villarama upon evaluation of the evidence presented in court. Thus, 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 promissor may not make use of a corporate entity as a means of evading the obligation of his covenant.
Bank of Commerce v. Nite (2015)
(1) complainant must allege in the complaint that the director or officer assented to patently unlawful acts of the corporation, or that the officer was guilty of gross negligence or bad faith; and
(2) complainant must clearly and convincingly prove such unlawful acts, negligence or bad faith.
Yu v. NLRC (1995)
While Twin Ace or Tanduay Distillers manufacture the same product at the same plant with the same equipment and machinery, they did not take over the corporate personality of TDI. There is no showing that TDI itself was absorbed by Twin Ace or that it ceased to exist as a separate corporation. The buyer limited itself to purchasing assets and machinery. The genuine nature of the sale to Twin Ace is also evidenced by the fact that Twin Ace was only a subsequent interested buyer. The use of a similar sounding or almost identical name is just an obvious device to capitalize on the goodwill which Tanduay Rum has built over the years
Delpher Trades v. IAC (1988)
In exchange for the property, Delfin and Pelagia Pacheko received a 55% share in the corporation. The transfer of ownership, if therefore, was merely in form but not in substance. In reality, petitioner corporation is a mere alter ego or conduit of the Pacheco co-owners. Thus, since the ownership of the property remained in the same hands, the respondent Hydro Pipes has no basis for its claim of a right of first refusal under the lease contract.
Garret v. Southern Railway (1959)
GEN: The parent corporation will be responsible for the obligations of its subsidiary when its control has been exercised to such a degree that the subsidiary has become its mere instrumentality.
AS APPLIED: The ownership of most of the capital stock of Lenoir by Southern, and Possibly subscription by Southern to the capital stock of Lenoir is not enough to show instrumentality.
Jardine Davies v. JRB Realty (2005)
It held that while it is true that Aircon is a subsidiary of the petitioner, it does not necessarily follow that Aircon’s corporate legal existence can just be disregarded. The records bear out that Aircon is a subsidiary of the petitioner only because the latter acquired Aircon’s majority of capital stock. It, however, does not exercise complete control over Aircon
Koppel v. Yatco (1946)
In this case, KCIEC and KPI intended to evade taxes by not paying the merchant tax with KPI acting as a “broker” when in reality, it is mostly owned by KCIEC. Hence, the two entities are one and the same insofar as the sales are concerned.
Liddel v. CIR (1961)
the mere fact that Liddell & Co. and Liddell Motors, Inc. are corporations owned and controlled by Frank Liddell directly or indirectly is not by itself sufficient to justify the disregard of the separate corporate identity of one from the other. However, a peculiar consequence of the organization and activities of Liddell Motors, Inc. is that under the law in force at the time of its incorporation, the sales tax on original sales of cars was progressive. Such progressive rate naturally would tempt the taxpayer to employ a way of reducing the price of the first sale, and Liddell Motors, Inc. was the medium created by Liddell & Co. to reduce the price and the tax liability.
La Campana Coffee v. Kaisahan (1953)
Tan Tong appears to be the owner of the gaugau factory. And the coffee factory, though an incorporated business, is in reality owned exclusively by Tan Tong and his family.
(1) the two factories have but one office, one management and one payroll, except after the day the case was certified to the Court of Industrial Relations, when the person who was discharging the office of cashier for both branches of the business began preparing separate payrolls for the two;
(2) the laborers of the gaugau factory and the coffee factory were interchangeable;
(3) the attempt to make the two factories appear as two separate businesses, when in reality they are but one, is but a device to defeat the ends of the law
WPM International v. Labayen (2014)
The piercing of the veil of corporate fiction is frowned upon and thus, must be done with caution. It can only be done if it has been clearly established that the separate and distinct personality of the corporation is used to justify a wrong, protect fraud, or perpetrate a deception. The court must be certain that the corporate fiction was misused to such an extent that injustice, fraud, or crime was committed against another, in disregard of its rights; it cannot be presumed
