SECTION 20 the stockholders or officers of the two corporations are substantially the

Sec. 20. De facto corporations. The due incorporation of any corporation
claiming in good faith to be a corporation under this Code, and its right to
exercise corporate powers, shall not be inquired into collaterally in any
private suit to which such corporation may be a party. Such inquiry may be
made by the Solicitor General in a quo warranto proceeding.
HALL v PICCIO
86 Phil 603, GR No L-2598, June 29, 1950
Facts: On May 28, 1947, petitioners C. Arnold Hall and Bradley P. Hall, and
respondents Fred Brown, Emma Brown, Hipolita D. Chapman and Ceferino S.
Abella, signed and acknowledged in Leyte, the article of incorporation of the
Far Eastern Lumber and Commercial Co., Inc., organized to engage in a
general lumber business to carry on as general contractors, operators and
managers, . Attached to the article was an affidavit of the treasurer stating
that 23,428 shares of stock had been subscribed and fully paid with certain
properties transferred to the corporation. The said articles of incorporation
was filed in the office of SEC. Pending action of the articles of incorporation
by SEC, the respondents filed a civil case against the petitioners alleging that
Far Eastern Lumber and Commercial Co was an unregistered partnership and
that they wished it dissolved because of bitter dissension among the
members, mismanagement and fraud by the managers and heavy financial
losses. The court (thru Judge Piccio) ordered the dissolution of the company.
Halls offered to file a counter bond for the discharge of the receiver but the
judge refused to accept the offer and discharge the receiver.
Issue: W/N the court had jurisdiction to decree the dissolution of the
company, because it being a de facto corporation, dissolution thereof may
only be ordered in a quo warranto proceeding instituted in accordance with
section 19 of the Corporation Law.
Held: Yes, the court has jurisdiction to take cognizance of the case!
Section 20 of the Corporation Law does not apply in this situation
same or their systems of operation unified. The facts showed that they had
one management, one payroll prepared by the same person, laborers were
interchangeable, there is only one entity as shown by the signboard ad in
trucks, packages and delivery forms and the same place of business.
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 and should not be permitted to prevail.
WHY PIERCE? So that La Campana cannot evade the jurisdiction of CIR since
La Campana Gawgaw has only 14 employees and only 5 are members of
Kaisahan.
RAMIREZ VS ORIENTALIST CO AND FERNANDEZ
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.

First, not having obtained the certificate of incorporation, the Far Eastern
Lumber and Commercial Co. — even its stockholders — may not probably
claim "in good faith" to be a corporation. (Under our statue it is to be noted
(Corporation Law, sec. 11) that it is the issuance of a certificate of
incorporation by the Director of the Bureau of Commerce and Industry which
calls a corporation into being. The immunity if collateral attack is granted to
corporations "claiming in good faith to be a corporation under this act." Such
a claim is compatible with the existence of errors and irregularities; but not
with a total or substantial disregard of the law. Unless there has been an
evident attempt to comply with the law the claim to be a corporation "under
this act" could not be made "in good faith." )
Second, this is not a suit in which the corporation is a party. This is a litigation
between stockholders of the alleged corporation, for the purpose of
obtaining its dissolution. Even the existence of a de jure corporation may be
terminated in a private suit for its dissolution between stockholders, without
the intervention of the state.
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.

Judgment: The petition will, therefore, be dismissed, with costs. The

preliminary injunction heretofore issued will be dissolved.

LA CAMPANA COFFEE FACTORY v KAISAHAN NG MANGGAGAWA

Facts: Tan Tong since 1932 has been engaged in the buying and selling
gawgaw under the trade name La Campana Gawgaw Packing. In 1950, Tan
Tong and members of his family organized the family corporation. La
Campana Coffee Factory with its principal office located in Gawgaw Packing.
Prior to said information, Tan Tong entered into a CBA with the labor union
of La Campana Gawgaw. Later on, his employees formed Kaisahan ng mga
Manggagawa ng La Campana with an authorization from the DOLE to
become an affiliate of the larger union.

Kaisahan with 66 members presented a demand for higher wages and more
privileges to La Campana Starch and Coffee Factory. The demand was not
granted and the DOLE certified the issue to the CIR. La Campana filed a
motion to dismiss alleging that the action was directed against two different
entities with distinct personalities. This was denied, hence this petition.

Issue: W/N the CIR has jurisdiction over the case.

Held: YES. La Compana Gawgaw and La Campana Factory are operating

under one single management or as one business though with two trade
names. The coffee factory is a corporation and by legal fiction, an entity
separate and apart from the persons composing it namely, Tan Tong and his
family.
However, the concept of separate corporate personality cannot be extended
to a point beyond reason and policy when invoked in support of an end
subversive of this policy and will be disregarded by the courts.
A subsidiary company which is created merely as an agent for the latter may
sometimes be regarded as identical with the parent corporation especially if