Adelio Cruz vs Quiterio Dalisay

In 1984, the National Labor Relations Commission issued an order against Qualitrans Limousine
Service, Inc. (QLSI) ordering the latter to reinstate the employees it terminated and to pay them
backwages. Quiterio Dalisay, Deputy Sheriff of the court, to satisfy the backwages, then garnished
the bank account of Adelio Cruz. Dalisay justified his act by averring that Cruz was the owner and
president of QLSI. Further, he claimed that the counsel for the discharged employees advised him
to garnish the account of Cruz.

ISSUE: Whether or not the action of Dalisay is correct.

HELD: No. What Dalisay did is tantamount to piercing the veil of corporate fiction. He actually
usurped the power of the court. He also overstepped his duty as a deputy sheriff. His duty is
merely ministerial and it is incumbent upon him to execute the decision of the court according to
its tenor and only against the persons obliged to comply. In this case, the person judicially named
to comply was QLSI and not Cruz. It is a well-settled doctrine both in law and in equity that as a
legal entity, a corporation has a personality distinct and separate from its individual stockholders
or members. The mere fact that one is president of a corporation does not render the property he
owns or possesses the property of the corporation, since the president, as individual, and the
corporation are separate entities.
Remo Jr. V. IAC (1989)

Lesson Applicable: Dealings Between Corporation and Stockholders (Corporate Law)

FACTS:

 December, 1977: the BOD of Akron Customs Brokerage Corporation (Akron), composed of
Jose Remo, Jr., Ernesto Bañares, Feliciano Coprada, Jemina Coprada, and Dario Punzalan
with Lucia Lacaste as Secretary, adopted a resolution authorizing the purchase of 13 trucks
for use in its business to be paid out of a loan the corporation may secure from any
lending institution

 January 25, 1978: Feliciano Coprada, as President and Chairman of Akron, purchased the
trucks from E.B. Marcha Transport Company, Inc. (Marcha) for P 525K as evidenced by a
deed of absolute sale.

 parties agreed on a downpayment in the amount of P50K and that the balance of
P 475K shall be paid within 60 days from the date of the execution of the
agreement.

 They also agreed that until balance is fully paid, the down payment of P 50K shall
accrue as rentals and failure to pay the balance within 60 days, then the balance
shall constitute as a chattel mortgage lien covering the cargo trucks and the
parties may allow an extension of 30 days and Marcha may ask for a revocation of
the contract and the reconveyance of all trucks.

 The obligation is further secured by a promissory note executed by

Coprada in favor of Akron. It is stated that the balance shall be paid from
the proceeds of a loan obtained from the Development Bank of the
Philippines (DBP) within 60 days

 After the lapse of 90 days, Marsha tried to collect from Coprada but the
Coprada promised to pay only upon the release of the DBP loan.
  Marsha sent Coprada a letter of demand dated May 10, 1978.

 Coprada reiterated that he was applying for a loan from

the DBP from the proceeds of which payment of the
obligation shall be made.

 Meanwhile, 2 of the trucks were sold under a pacto de retro sale to a Mr. Bais of
the Perpetual Loans and Savings Bank at Baclaran.

 March 15, 1978: sale was authorized by board resolution

 Marsha found that no loan application was ever filed by Akron with DBP.

 Akron paid rentals of P 500/day pursuant to a subsequent agreement, from April 27, 1978
(the end of the 90-days to pay the balance) to May 31, 1978. Thereafter, no more rental
payments were made.

 June 17, 1978: Coprada wrote Marsha begging for a grace period of until the end of the
month to pay the balance of the purchase price; that he will update the rentals within the
week; and in case he fails, then he will return the 13 units should Marsha elect

 August 1, 1978: Marsha through counsel, wrote Akron demanding the return of the 13
trucks and the payment of P 25K back rentals from June 1 to August 1, 1978.

 August 8, 1978: Coprada asked for another grace period of up to August 31, 1978 to pay
the balance, stating as well that he is expecting the approval of his loan application from a
financing company, and that 10 trucks have been returned to Bagbag, Novaliches.

 December 9, 1978: Coprada informed Marsha that he had returned 10 trucks to Bagbag
and that a resolution was passed by the board of directors confirming the deed of
assignment to Marsha of P 475K from the proceeds of a loan obtained by Akron from the
State Investment House, Inc.
  In due time, Marsha filed a compliant for the recovery of P 525K or the return of the 13
trucks with damages against Akron and its officers and directors

 Remo Jr. sold all his shares in Akron to Coprada. It also appears that Akron
amended its articles of incorporation thereby changing its name to Akron
Transport International, Inc. which assumed the liability of Akron to Marsha.

 CA affirmed RTC: favor of Marsha

ISSUE: W/N Remo Jr. should be held personally liable together with Akron Transport International,
Inc.

HELD: NO. Petition is granted.

 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

 While it is true that in December, 1977 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

 Coprada, President and Chairman of Akron, who negotiated

 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.
  As to the sale through pacto de retro of the two units to a third person by the corporation
by virtue of a board resolution, Remo Jr. asserts that he never signed the resolution.

 Be that as it may, the sale is not inherently fraudulent as the 13 units were sold
through a deed of absolute sale to Akron so that the corporation is free to dispose
of the same. Of course, it was stipulated that in case of default , a chattel
mortgage lien shall be constituted on the 13 units.

 the new corporation confirmed and assumed the obligation of the old corporation. There
is no indication of an attempt on the part of Akron to evade payment of its obligation

 it is his inherent right as a stockholder to dispose of his shares of stock anytime he so

desires.

 Fraud must be established by clear and convincing evidence. If at all, the principal
character on whom fault should be attributed is Feliciano Coprada, the President of Akron.
Fortunately, a judgment against him from the trial court has long been final and executory.

Del Rosario vs National Labor Relations Commission

187 SCRA 777 [GR No. 85416 July 24, 1990]

Facts: In POEA case no. 85-06-0394, the Philippine Overseas Employment Administration (POEA)
promulgated a decision on February 4,1986 dismissing the complaint for money claims for lack of
merit. The decision was appealed to the NLRC, which on April 30, 1987 reversed the POEA decision
and ordered Philsa Construction and Trading Co.Ind and Ariel Enterprises (the foreign employer) to
jointly and severally pay private respondent the peso equivalent of $16,039,000 salary differentials
and $2,420.03 as vacation leave benefits. A writ of execution was issued by the POEA but it was
returned unsatisfied incapable of satisfying the judgement. Private respondent moved for the
issuance of an alias writ against the officers of Philsa. This motion was opposed by the officers led
by petitioners, the president and general manager of the corporation. However, POEA issued a
resolution ordering the sheriff to execute against the properties of the petitioner and if
insufficient, against the cash and/or surety bond of bonding company concerned for the full
satisfaction of the judgement awarded.

Issue: Whether or not the POEA resolution is proper.

Held: No. Under the law, a corporation is bestowed juridical personality, separate and distinct
from its stockholders. But when the juridical personality of the corporation is used to defeat public
convenience, justify wrong, protect or defend crime, the corporation shall be considered as a mere
association of persons and its responsible officers and/or stockholders shall be individually liable.
For the same reasons, a corporation shall be liable for obligations of a stockholder or a corporation
and its successor-in-interest shall be considered as one and the liability of the former shall attach
to the latter.

But for the separate juridical personality of a corporation to be disregarded, the wrong doing must
be clearly and convincingly established. It cannot be presumed.

Thus, at the time Philsa allowed its license to lapse in 1985 and even at the time it was delivered in
1986, there was yet no judgement in favor of private respondent. An intent to evade payment of
his claims cannot therefore be implied from the expiration of Phila’s license and its delisting.

Neither will the organization of Philsa International Placement and Services Corp. and its
registration with the POEA as a private employment agency imply fraud since it was organized and
registered in 1981, several years before private respondent filed his complaint with the POEA in
1985. The creation of the second anticipation of private respondent’s money claims and the
consequent adverse judgement against Philsa.

Likewise, substantially identity of the incorporators of the two corporations does not necessarily
imply fraud.

PNB V. RITRATTO – G.R. NO. 142616 – 362 SCRA 216

Facts:

PNB-IFL, a subsidiary company of PNB extended credit to Ritratto and secured by the real estate
mortgages on four parcels of land. Since there was default, PNB-IFL thru PNB, foreclosed the
property and were subject to public auction. Ritratto Group filed a complaint for injunction. PNB
filed a motion to dismiss on the grounds of failure to state a cause of action and the absence of
any privity between respondents and petitioner.

Issue:

Is PNB privy to the loan contracts entered into by respondent & PNB-IFL being that PNB-IFL is
owned by PNB?

Held:

No. The contract questioned is one entered into between Ritratto and PNB-IFL. PNB was
admittedly an agent of the latter who acted as an agent with limited authority and specific duties
under a special power of attorney incorporated in the real estate mortgage.
The mere fact that a corporation owns all of the stocks of another corporation, taken alone is not
sufficient to justify their being treated as one entity. If used to perform legitimate functions, a
subsidiary’s separate existence may be respected, and the liability of the parent corporation as
well as the subsidiary will be confined to those arising in their respective business. The courts may,
in the exercise of judicial discretion, step in to prevent the abuses of separate entity privilege and
pierce the veil of corporate entity.

Ramirez vs Orientalist Co. (1918)

Facts: Orientalist Company was engaged in the business of maintaining and conducting a theatre
in the city of Manila for the exhibition of cinematographic films. engaged in the business of
marketing films for a manufacturer or manufacturers, there engaged in the production or
distribution of cinematographic material. In this enterprise the plaintiff was represented in the city
of Manila by his son, Jose Ramirez. The directors of the Orientalist Company became apprised of
the fact that the plaintiff in Paris had control of the agencies for two different marks of films,
namely, the “Eclair Films” and the “Milano Films;” and negotiations were begun with said officials
of the Orientalist Company by Jose Ramirez, as agent of the plaintiff. The defendant Ramon J.
Fernandez, one of the directors of the Orientalist Company and also its treasure, was chiefly active
in this matter. Ramon J. Fernandez had an informal conference with all the members of the
company’s board of directors except one, and with approval of those with whom he had
communicated, addressed a letter to Jose Ramirez, in Manila, accepting the offer contained in the
memorandum the exclusive agency of the Eclair films and Milano films. In due time the films
began to arrive in Manila, it appears that the Orientalist Company was without funds to meet
these obligations. Action was instituted by the plaintiff to Orientalist Company, and Ramon J.
Fernandez for sum of money.

Issue: WON the Orientalist Co. is liable for the acts of its treasurer, Fernandez?

Held: Yes. It will be observed that Ramon J. Fernandez was the particular officer and member of
the board of directors who was most active in the effort to secure the films for the corporation.
The negotiations were conducted by him with the knowledge and consent of other members of
the board; and the contract was made with their prior approval. In the light of all the
circumstances of the case, we are of the opinion that the contracts in question were thus
inferentially approved by the company’s board of directors and that the company is bound unless
the subsequent failure of the stockholders to approve said contracts had the effect of abrogating
the liability thus created.