I.
Introduction
Benguet Consolidated Mining Co. vs Mariano
Pineda
98 Phil 711 – Business Organization – Corporation
Law – Sociedad Anonima – Corporate Existence
Benguet Consolidated Mining Company was
organized in 1903 under the Spanish Code of
Commerce of 1886 as a sociedad anonima. It was
agreed by the incorporators that Benguet Mining was
to exist for 50 years.
In 1906, Act 1459 (Corporation Law) was enacted
which superseded the Code of Commerce of 1886.
Act 1459 essentially introduced the American
concept of a corporation. The purpose of the law,
among others, is to eradicate the Spanish Code and
make sociedades anonimas obsolete.
In 1953, the board of directors of Benguet Mining
submitted to the Securities and Exchange
Commission an application for them to be allowed to
extend the life span of Benguet Mining. Then
Commissioner Mariano Pineda denied the
application as it ruled that the extension requested is
contrary to Section 18 of the Corporation Law of
1906 which provides that the life of a corporation
shall not be extended by amendment beyond the time
fixed in their original articles.
Benguet Mining contends that they have a vested
right under the Code of Commerce of 1886 because
they were organized under said law; that under said
law, Benguet Mining is allowed to extend its life by
simply amending its articles of incorporation; that
the prohibition in Section 18 of the Corporation Code
of 1906 does not apply to sociedades anonimas
already existing prior to the Law’s enactment; that
even assuming that the prohibition applies to
Benguet Mining, it should be allowed to be
reorganized as a corporation under the said
Corporation Law.
ISSUE: Whether or not Benguet Mining is correct.
HELD: No. Benguet Mining has no vested right to
extend its life. It is a well settled rule that no person
has a vested interest in any rule of law entitling him
to insist that it shall remain unchanged for his benefit.
Had Benguet Mining agreed to extend its life prior to
the passage of the Corporation Code of 1906 such
right would have vested. But when the law was
passed in 1906, Benguet Mining was already
deprived of such right.
To allow Benguet Mining to extend its life will be
inimical to the purpose of the law which sought to
render obsolete sociedades anonimas. If this is
allowed, Benguet Mining will unfairly do something
which new corporations organized under the new
Corporation Law can’t do – that is, exist beyond 50
years. Plus, it would have reaped the benefits of
being a sociedad anonima and later on of being a
corporation. Further, under the Corporation Code of
1906, existing sociedades anonimas during the
enactment of the law must choose whether to
continue as such or be organized as a corporation
under the new law. Once a sociedad anonima
chooses one of these, it is already proscribed from
choosing the other. Evidently, Benguet Mining chose
to exist as a sociedad anonima hence it can no longer
elect to become a corporation when its life is near its
end.
II. GENERAL
a. Theories on Formation
Renato Tayag vs Benguet Consolidated, Inc.
26 SCRA 242 – Business Organization –
Corporation Law – Domicile of a Corporation – By
Laws Must Yield To a Court Order – Corporation is
an Artificial Being
In March 1960, Idonah Perkins died in New York.
She left behind properties here and abroad. One
property she left behind were two stock certificates
covering 33,002 shares of stocks of the Benguet
Consolidated, Inc (BCI). Said stock certificates were
in the possession of the Country Trust Company of
New York (CTC-NY). CTC-NY was the domiciliary
administrator of the estate of Perkins (obviously in
the USA). Meanwhile, in 1963, Renato Tayag was
appointed as the ancillary administrator (of the
properties of Perkins she left behind in the
Philippines).
A dispute arose between CTC-NY and Tayag as to
who between them is entitled to possess the stock
certificates. A case ensued and eventually, the trial
court ordered CTC-NY to turn over the stock
certificates to Tayag. CTC-NY refused. Tayag
then filed with the court a petition to have said stock
certificates be declared lost and to compel BCI to
issue new stock certificates in replacement thereof.
The trial court granted Tayag’s petition.
BCI assailed said order as it averred that it cannot
possibly issue new stock certificates because the two
stock certificates declared lost are not actually lost;
that the trial court as well Tayag acknowledged that
the stock certificates exists and that they are with
CTC-NY; that according to BCI’s by laws, it can
only issue new stock certificates, in lieu of lost,
stolen, or destroyed certificates of stocks, only after
court of law has issued a final and executory order as
to who really owns a certificate of stock.
ISSUE: Whether or not the arguments of Benguet
Consolidated, Inc. are correct.
HELD: No. Benguet Consolidated is a corporation
who owes its existence to Philippine laws. It has been
given rights and privileges under the law. Corollary,
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it also has obligations under the law and one of those
is to follow valid legal court orders. It is not immune
from judicial control because it is domiciled here in
the Philippines. BCI is a Philippine corporation
owing full allegiance and subject to the unrestricted
jurisdiction of local courts. Its shares of stock cannot
therefore be considered in any wise as immune from
lawful court orders. Further, to allow BCI’s
opposition is to render the court order against CTC-
NY a mere scrap of paper. It will leave Tayag
without any remedy simply because CTC-NY, a
foreign entity refuses to comply with a valid court
order. The final recourse then is for our local courts
to create a legal fiction such that the stock certificates
in issue be declared lost even though in reality they
exist in the hands of CTC-NY. This is valid. As held
time and again, fictions which the law may rely upon
in the pursuit of legitimate ends have played an
important part in its development.
Further still, the argument invoked by BCI that it can
only issue new stock certificates in accordance with
its bylaws is misplaced. It is worth noting that CTC-
NY did not appeal the order of the court – it simply
refused to turn over the stock certificates hence
ownership can be said to have been settled in favor
of estate of Perkins here. Also, assuming that there
really is a conflict between BCI’s bylaws and the
court order, what should prevail is the lawful court
order. It would be highly irregular if court orders
would yield to the bylaws of a corporation. Again, a
corporation is not immune from judicial orders.
Philippine Stock Exchange vs Court of Appeals
287 SCRA 232 – Business Organization –
Corporation Law – Extent of Power of the Securities
and Exchange Commission
Puerto Azul Land, Inc. (PALI) is a corporation
engaged in the real estate business. PALI was
granted permission by the Securities and Exchange
Commission (SEC) to sell its shares to the public in
order for PALI to develop its properties.
PALI then asked the Philippine Stock Exchange
(PSE) to list PALI’s stocks/shares to facilitate
exchange. The PSE Board of Governors denied
PALI’s application on the ground that there were
multiple claims on the assets of PALI. Apparently,
the Marcoses, Rebecco Panlilio (trustee of the
Marcoses), and some other corporations were
claiming assets if not ownership over PALI.
PALI then wrote a letter to the SEC asking the latter
to review PSE’s decision. The SEC reversed PSE’s
decisions and ordered the latter to cause the listing of
PALI shares in the Exchange.
ISSUE: Whether or not it is within the power of the
SEC to reverse actions done by the PSE.
2
HELD: Yes. The SEC has both jurisdiction and
authority to look into the decision of PSE pursuant to
the Revised Securities Act and for the purpose of
ensuring fair administration of the exchange. PSE, as
a corporation itself and as a stock exchange is subject
to SEC’s jurisdiction, regulation, and control. In
order to insure fair dealing of securities and a fair
administration of exchanges in the PSE, the SEC has
the authority to look into the rulings issued by the
PSE. The SEC is the entity with the primary say as
to whether or not securities, including shares of stock
of a corporation, may be traded or not in the stock
exchange.
HOWEVER, in the case at bar, the Supreme Court
emphasized that the SEC may only reverse decisions
issued by the PSE if such are tainted with bad faith.
In this case, there was no showing that PSE acted
with bad faith when it denied the application of
PALI. Based on the multiple adverse claims against
the assets of PALI, PSE deemed that granting PALI’s
application will only be contrary to the best interest
of the general public. It was reasonable for the PSE
to exercise its judgment in the manner it deems
appropriate for its business identity, as long as no
rights are trampled upon, and public welfare is
safeguarded.
b. Tri-level Existence in Corporate
c. Attributes of a Corporation
Philippine National Bank vs. Andrada
Electric & Engineering Co.
[GR 142936, 17 April 2002]
Facts: On 26 August 1975, the Philippine national
Bank (PNB) acquired the assets of the Pampanga
Sugar Mills (PASUMIL) that were earlier foreclosed
by the Development Bank of the Philippines (DBP)
under LOI 311. The PNB organized the ational Sugar
Development Corporation (NASUDECO) in
September 1975, to take ownership and possession
of the assets and ultimately to nationalize and
consolidate its interest in other PNB controlled sugar
mills. Prior to 29 October 1971, PASUMIL engaged
the services of the Andrada Electric & Engineering
Company (AEEC) for electrical rewinding and
repair, most of which were partially paid by
PASUMIL, leaving several unpaid accounts with
AEEC. On 29 October 1971, AEEC and PASUMIL
entered into a contract for AEEC to perform the (a)
Construction of a power house building; 3 reinforced
concrete foundation for 3 units 350 KW diesel engine
generating sets, 3 reinforced concrete foundation for
the 5,000 KW and 1,250 KW turbo generator sets,
among others. Aside from the work contract,
PASUMIL required AEEC to perform extra work,
and provide electrical equipment and spare parts. Out
of the total obligation of P777,263.80, PASUMIL
had paid only P250,000.00, leaving an unpaid
balance, as of 27 June 1973, amounting to
P527,263.80. Out of said unpaid balance of
P527,263.80, PASUMIL made a partial payment to
AEEC of P14,000.00, in broken amounts, covering
the period from 5 January 1974 up to 23 May 1974,
leaving an unpaid balance of P513,263.80.
PASUMIL and PNB, and now NASUDECO,
allegedly failed and refused to pay AEEC their just,
valid and demandable obligation (The President of
the NASUDECO is also the Vice-President of the
PNB. AEEC besought said official to pay the
outstanding obligation of PASUMIL, inasmuch as
PNB and NASUDECO now owned and possessed
the assets of PASUMIL, and these defendants all
benefited from the works, and the electrical, as well
as the engineering and repairs, performed by
AEEC).
Because of the failure and refusal of PNB,
PASUMIL and/or NASUDECO to pay their
obligations, AEEC allegedly suffered actual
damages in the total amount of P513,263.80; and that
in order to recover these sums, AEEC was compelled
to engage the professional services of counsel, to
whom AEEC agreed to pay a sum equivalent to 25%
of the amount of the obligation due by way of
attorney's fees. PNB and NASUDECO filed a joint
motion to dismiss on the ground that the complaint
failed to state sufficient allegations to establish a
cause of action against PNB and NASUDECO,
inasmuch as there is lack or want of privity of
contract between the them and AEEC. Said motion
was denied by the trial court in its 27 November
order, and ordered PNB nad NASUDECO to file
their answers within 15 days. After due proceedings,
the Trial Court rendered judgment in favor of AEEC
and against PNB, NASUDECO and PASUMIL; the
latter being ordered to pay jointly and severally the
former (1) the sum of P513,623.80 plus interest
thereon at the rate of 14% per annum as claimed from
25 September 1980 until fully paid; (2) the sum of
P102,724.76 as attorney's fees; and, (3) Costs. PNB
and NASUDECO appealed. The Court of Appeals
affirmed the decision of the trial court in its decision
of 17 April 2000 (CA-GR CV 57610. PNB and
NASUDECO filed the petition for review.
Issue: Whether PNB and NASUDECO may be held
liable for PASUMIL’s liability to AEEC.
Held: Basic is the rule that a corporation has a legal
personality distinct and separate from the persons
and entities owning it. The corporate veil may be
lifted only if it has been used to shield fraud, defend
crime, justify a wrong, defeat public convenience,
insulate bad faith or perpetuate injustice. Thus, the
mere fact that the Philippine National Bank (PNB)
acquired ownership or management of some assets
of the Pampanga Sugar Mill (PASUMIL), which had
earlier been foreclosed and purchased at the resulting
public auction by the Development Bank of the
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Philippines (DBP), will not make PNB liable for the
PASUMIL's contractual debts to Andrada Electric &
Engineering Company (AEEC).
Piercing the veil of corporate fiction may be allowed
only if the following elements concur: (1) control —
not mere stock control, but complete domination —
not only of finances, but of policy and business
practice in respect to the transaction attacked, must
have been such that the corporate entity as to this
transaction had at the time no separate mind, will or
existence of its own; (2) such control must have been
used by the defendant to commit a fraud or a wrong
to perpetuate the violation of a statutory or other
positive legal duty, or a dishonest and an unjust act
in contravention of plaintiff's legal right; and (3) the
said control and breach of duty must have
proximately caused the injury or unjust loss
complained of. The absence of the foregoing
elements in the present case precludes the piercing of
the corporate veil.
First, other than the fact that PNB and NASUDECO
acquired the assets of PASUMIL, there is no
showing that their control over it warrants the
disregard of corporate personalities. Second, there is
no evidence that their juridical personality was used
to commit a fraud or to do a wrong; or that the
separate corporate entity was farcically used as a
mere alter ego, business conduit or instrumentality of
another entity or person. Third, AEEC was not
defrauded or injured when PNB and NASUDECO
acquired the assets of PASUMIL. Hence, although
the assets of NASUDECO can be easily traced to
PASUMIL, the transfer of the latter's assets to PNB
and NASUDECO was not fraudulently entered into
in order to escape liability for its debt to AEEC.
Neither was there any merger or consolidation with
respect to PASUMIL and PNB. The procedure
prescribed under Title IX of the Corporation Code 59
was not followed. In fact, PASUMIL's corporate
existence had not been legally extinguished or
terminated. Further, prior to PNB's acquisition of the
foreclosed assets, PASUMIL had previously made
partial payments to AEEC for the former's obligation
in the amount of P777,263.80. As of 27 June 1973,
PASUMIL had paid P250,000 to AEEC and, from 5
January 1974 to 23 May 1974, another P14,000.
Neither did PNB expressly or impliedly agree to
assume the debt of PASUMIL to AEEC. LOI 11
explicitly provides that PNB shall study and submit
recommendations on the claims of PASUMIL's
creditors. Clearly, the corporate separateness
between PASUMIL and PNB remains, despite
AEEC's insistence to the contrary.
Antonio Vasquez vs, Francisco De Borja
74 Phil 560 – Civil Law – Torts and Damages –
Distinction of Liability of Employers Under Article
2180 and Their Liability for Breach of Contract
In January 1932, Francisco De Borja entered into a
contract of sale with the NVSD (Natividad-Vasquez
Sabani Development Co., Inc.). The subject of the
sale was 4,000 cavans of rice valued at Php2.10 per
cavan. On behalf of the company, the contract was
executed by Antonio Vasquez as the company’s
acting president. NVSD. only delivered 2,488 cavans
and failed and refused despite demand to deliver the
rest hence De Borja incurred damages (apparently,
NVSD was insolvent). He then sue Vasquez for
payment of damages.
ISSUE: Whether or not Vasquez is liable for
damages.
HELD: No. Vasquez is not party to the contract as it
was NVSD which De Borja contracted with. It is well
known that a corporation is an artificial being
invested by law with a personality of its own,
separate and distinct from that of its stockholders and
from that of its officers who manage and run its
affairs. The mere fact that its personality is owing to
a legal fiction and that it necessarily has to act thru
its agents, does not make the latter personally liable
on a contract duly entered into, or for an act lawfully
performed, by them for an in its behalf.
The fact that the corporation, acting thru Vazquez as
its manager, was guilty of negligence in the
fulfillment of the contract did not make Vazquez
principally or even subsidiarily liable for such
negligence. Since it was the corporation’s contract,
its non fulfillment, whether due to negligence or fault
or to any other cause, made the corporation and not
its agent liable.
JUSTICE PARAS Dissenting :
Vasquez as president of NVSD is liable for damages.
Vasquez, as acting president and manager of NVSD,
and with full knowledge of the then insolvent status
of his company, agreed to sell to De Borja 4,000
cavans of palay. Further, NVSD was soon thereafter
dissolved.
Wensha Spa Center, Inc. vs. Yung; G.R. No.
185122, August 16, 2010
Facts: Wensha Spa is in the business of sauna bath
and massage services. Xu is the president and Loreta
was the administrative manager at the time of her
termination from employment. Loreta used to be
employed by Manmen where Xu was a client. Since
Su was impressed with Loreta’s performance, he
convinced Loreta to transfer and work at Wensha.
Loreta started working on April 21, 2004 as Xu’s
personal assistant and interpreter. She was promoted
to the position of administrative Manager. Loreta
4
was asked to resign fromWensha because according
to a Feng Shui master, her aura did not match that of
Xu. Loreta filed a case for illegal dismissal against
Xu and Wensha. The Labor Arbiter dismissed
Loreta’s complaint for lack of merit. He found it
more probable that Loreta was dismissed due to loss
of trust and confidence in her. The CA reversed the
ruling of the NLRC.
Issue: Whether or not Xu is solidarily liable with
Wensha, assuming that Loreta was illegally
dismissed.
Ruling: No. Xu is not solidarily liable with Wensha.
Elementary is the rule that a corporation is invested
by law with a personality separate and distinct from
those of the persons composing it and from that of
any other legal entity to which it may be related.
Mere ownership by a single stockholder or by
another corporation of all or nearly all of the capital
stock of a corporation is not of itself sufficient
ground for disregarding the separatecorporate
personality.- In labor cases, corporate directors and
officers may be held solidarily liable with the
corporation for the termination of employment only
if done with malice or in bad faith. Bad faith does not
connote bad judgment or negligence. It imports a
dishonest purpose or some moral obliquity and
conscious doing of wrong. It means breach of a
known duty through some motive or interest or ill
will it partakes of the nature of fraud. On the subject
decision, the CA concluded that petitioner Xu and
Wensha are jointly and severally liable to Loreta. We
have read the decision in its entirety but simply failed
to come across any finding of bad faith or malice on
the part of Xu. There is, therefore, no justification for
such a ruling. To sustain such a finding, there should
be an evidence on record that an officer or director
acted maliciously or in bad faith in terminating the
services of an employee. Moreover, the finding or
indication that the dismissal was effected with malice
or bad faith should be stated in the decision itself.
MONFORT HERMANOS AGRICULTURAL
DEVELOPMENT CORPORATION v.
ANTONIO B. MONFORT III,
GR No. 152542 & 155472, 2004-07-08
Facts: Monfort Hermanos Agricultural Development
Corporation, a domestic private corporation, is the
registered owner of a farm, fishpond and sugar cane
plantation known as Haciendas San Antonio II,
Marapara, Pinanoag and Tinampa-an, all situated in
Cadiz City.
It also owns one unit of motor vehicle and two units
of tractors.[4] The same allowed Ramon H. Monfort,
its Executive Vice President, to breed and maintain
fighting cocks in his personal capacity at Hacienda
San Antonio. The group of Antonio Monfort III,
through force and intimidation, allegedly took
possession of the 4 Haciendas, the produce thereon
and the motor vehicle and tractors, as well as the
fighting cocks of Ramon H. Monfort.
The Corporation, represented by its President, Ma.
Antonia M. Salvatierra, and Ramon H. Monfort, in
his personal capacity, filed against the group of
Antonio Monfort III, a complaint[6] for delivery of
motor vehicle, tractors and 378... fighting cocks,
with prayer for injunction and damages. The group
of Antonio Monfort III filed a motion to dismiss
contending, inter alia, that Ma. Antonia M.
Salvatierra has no capacity to sue on behalf of the
Corporation because the March 31, 1997 Board
Resolution [7] authorizing Ma. Antonia M.
Salvatierra and/or Ramon H. Monfort to represent
the Corporation is void as the purported Members of
the Board who passed the same were not validly
elected officers of the Corporation.
The trial court denied the motion to dismiss.[8] The
group of Antonio Monfort III filed a petition for
certiorari with the Court of Appeals but the same was
dismissed on June 7, 2002.
The motion for reconsideration filed by the group of
Antonio Monfort III was denied.
On April 21, 1997, Ma. Antonia M. Salvatierra filed
on behalf of the Corporation a complaint for forcible
entry, preliminary mandatory injunction with
temporary restraining order and damages against the
group of Antonio Monfort III, before the Municipal
Trial Court (MTC) of
Cadiz City.[11] It contended that the latter through
force and intimidation, unlawfully took possession of
the 4 Haciendas and deprived the Corporation of the
produce thereon.
The group of Antonio Monfort III alleged that they
are possessing and controlling the Haciendas and
harvesting the produce therein on behalf of the
corporation and not for themselves. They likewise
raised the affirmative defense... of lack of legal
capacity of Ma. Antonia M. Salvatierra to sue on
behalf of the Corporation.
MTC of Cadiz City rendered a decision dismissing
the complaint. The Regional Trial Court of Negros
Occidental, Branch 60, reversed the Decision of the
MTCC. Aggrieved, the group of Antonio Monfort III
filed a petition for review with the Court of Appeals.
Special Tenth Division set aside the judgment of the
RTC and dismissed the complaint for forcible entry
for lack of capacity of Ma. Antonia M. Salvatierra to
represent the Corporation.
Unfazed, the Corporation filed a petition for review
with this Court The group of Antonio Monfort III
5
claims that the March 31, 1997 Board Resolution
authorizing Ma. Antonia M. Salvatierra and/or
Ramon H. Monfort to represent the Corporation is
void because the purported Members of the Board
who passed the same were not validly elected
officers... of the Corporation.
Issues: The focal issue in these consolidated petitions
is whether or not Ma. Antonia M. Salvatierra has the
legal capacity to sue on behalf of the Corporation.
Ruling: A corporation has no power except those
expressly conferred on it by the Corporation Code
and those that are implied or incidental to its
existence. In turn, a corporation exercises said
powers through its board of directors and/or its duly
authorized officers and... agents. Thus, it has been
observed that the power of a corporation to sue and
be sued in any court is lodged with the board of
directors that exercises its corporate powers. In turn,
physical acts of the corporation, like the signing of
documents, can be performed... only by natural
persons duly authorized for the purpose by corporate
by-laws or by a specific act of the board of directors.
There is thus a doubt as to whether Paul M. Monfort,
Yvete M. Benedicto, Jaqueline M. Yusay and Ester
S. Monfort, were indeed duly elected Members of the
Board legally constituted to bring suit in behalf of the
Corporation.
We find that Ma. Antonia M. Salvatierra failed to
prove that four of those who authorized her to
represent the Corporation were the lawfully elected
Members of the Board of the Corporation. As such,
they cannot confer valid authority for her to... sue on
behalf of the corporation.
d. Advantages and Disadvantages of
Corporations
e. Corporations differentiated from other
business organizations
Pioneer Insurance & Surety Corporation vs
Court of Appeals
175 SCRA 668 –Business Organization –
Corporation Law – When De Facto Partnership
Does Not Exist
Jacob Lim was the owner of Southern Air Lines, a
single proprietorship. In 1965, Lim convinced
Constancio Maglana, Modesto Cervantes, Francisco
Cervantes, and Border Machinery and Heavy
Equipment Company (BORMAHECO) to contribute
funds and to buy two aircrafts which would form
part a corporation which will be the expansion of
Southern Air Lines. Maglana et al then contributed
and delivered money to Lim.
But instead of using the money given to him to pay
in full the aircrafts, Lim, without the knowledge of
Maglana et al, made an agreement with Pioneer
Insurance for the latter to insure the two aircrafts
which were brought in installment from Japan
Domestic Airlines (JDA) using said aircrafts as
security. So when Lim defaulted from paying JDA,
the two aircrafts were foreclosed by Pioneer
Insurance.
It was established that no corporation was formally
formed between Lim and Maglana et al.
ISSUE: Whether or not Maglana et al must share in
the loss as general partners.
HELD: No. There was no de facto partnership.
Ordinarily, when co-investors agreed to do business
through a corporation but failed to incorporate, a de
facto partnership would have been formed, and as
such, all must share in the losses and/or gains of the
venture in proportion to their contribution. But in this
case, it was shown that Lim did not have the intent to
form a corporation with Maglana et al. This can be
inferred from acts of unilaterally taking out a surety
from Pioneer Insurance and not using the funds he
got from Maglana et al. The record shows that Lim
was acting on his own and not in behalf of his other
would-be incorporators in transacting the sale of the
airplanes and spare parts.
Lim Tong Lim vs. Philippine Fishing Gear
Industries, Inc.
Business Organization – Partnership, Agency, Trust
– Corporation by Estoppel
It was established that Lim Tong Lim requested Peter
Yao to engage in commercial fishing with him and
one Antonio Chua. The three agreed to purchase two
fishing boats but since they do not have the money
they borrowed from one Jesus Lim (brother of Lim
Tong Lim). They again borrowed money and they
agreed to purchase fishing nets and other fishing
equipments. Now, Yao and Chua represented
themselves as acting in behalf of “Ocean Quest
Fishing Corporation” (OQFC) they contracted with
Philippine Fishing Gear Industries (PFGI) for the
purchase of fishing nets amounting to more than
P500k.
They were however unable to pay PFGI and so they
were sued in their own names because apparently
OQFC is a non-existent corporation. Chua admitted
liability and asked for some time to pay. Yao waived
his rights. Lim Tong Lim however argued that he’s
not liable because he was not aware that Chua and
Yao represented themselves as a corporation; that the
two acted without his knowledge and consent.
ISSUE: Whether or not Lim Tong Lim is liable.
6
HELD: Yes. From the factual findings of both lower
courts, it is clear that Chua, Yao and Lim had decided
to engage in a fishing business, which they started by
buying boats worth P3.35 million, financed by a loan
secured from Jesus Lim. In their Compromise
Agreement, they subsequently revealed their
intention to pay the loan with the proceeds of the sale
of the boats, and to divide equally among them the
excess or loss. These boats, the purchase and the
repair of which were financed with borrowed money,
fell under the term “common fund” under Article
1767. The contribution to such fund need not be cash
or fixed assets; it could be an intangible like credit or
industry. That the parties agreed that any loss or
profit from the sale and operation of the boats would
be divided equally among them also shows that they
had indeed formed a partnership.
Lim Tong Lim cannot argue that the principle of
corporation by estoppels can only be imputed to Yao
and Chua. Unquestionably, Lim Tong Lim benefited
from the use of the nets found in his boats, the boat
which has earlier been proven to be an asset of the
partnership. 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.
f. Constitutional Guarantees of a Corporation
SMITH BELL AND COMPANY PHILS. V. CA
(G.R. NO. L-56294)
Facts: M/V “Don Carlos,” an inter-island vessel
owned and operated by private respondent Go Thong
was sailing south bound for Cebu, when it collided
with M/S “Yotai Maru,” a merchant vessel of
Japanese registry which was approaching the port of
Manila coming in from Kobe, Japan. The bow of the
“Don Carlos” rammed the left side of the “Yotai
Maru” inflicting a gaping hole through which
seawater rushed in and flooded the hatch, damaging
all the cargo stowed therein. The consignees of the
damaged cargo having been paid by their insurance
companies, the latter in turn commenced actions
against private respondent Go Thong for damages
sustained by the various shipments. 2 cases were
filed before the RTC. The first case (Smith Bell and
Sumitomo Insurance v. Go Thong) reached the SC
which ruled in finality that negligence was with the
officers and crew of “Don Carlos.” On the contrary,
the second case (Smith Bell and Tokyo Insurance v.
Go Thong) was decided by the CA holding the
officers and crew of “Yotai Maru” at fault in the
collision. Hence the present petition.
Issue: Whether or not inscrutable fault is present in
said collision.
Ruling: NO. The Court believes that there are three
(3) principal factors which are constitutive of
negligence on the part of the “Don Carlos,” which
negligence was the proximate cause of the collision.
(1) The first of these factors was the failure of the
“Don Carlos” to comply with the requirements of
Rule 18 (a) of the International Rules of the Road
which provides as follows: (a) When two power-
driven vessels are meeting end on, or nearly end on,
so as to involve risk of collision, each shall alter her
course to starboard, so that each may pass on the port
side of the other. The evidence on this factor state
that “Don Carlos” altered its course by five degrees
to the left instead of to the right which maneuver was
the error that caused the collision in question. Why it
did so is because “Don Carlos” was overtaking
another vessel, the “Don Francisco”, and was then at
the right side of the aforesaid vessel. It was in the
process of overtaking “Don Francisco” that “Don
Carlos” was finally brought into a situation where he
was meeting end-on or nearly end-on “Yotai Maru,
thus involving risk of collision.
(2) The second circumstance constitutive of
negligence on the part of the “Don Carlos” was its
failure to have on board that night a “proper look-
out” as required by Rule I (B) Under Rule 29 of the
same set of Rules, all consequences arising from the
failure of the “Don Carlos” to keep a “proper look-
out” must be borne by the “Don Carlos.” In the case
at bar, the failure of the “Don Carlos” to recognize
in a timely manner the risk of collision with the
“Yotai Maru” coming in from the opposite direction,
was at least in part due to the failure of the “Don
Carlos” to maintain a proper look-out.
(3) The third factor constitutive of negligence on the
part of the “Don Carlos” relates to the fact that
Second Mate Benito German was, immediately
before and during the collision, in command of the
“Don Carlos.” Second Mate German simply did not
have the level of experience, judgment and skill
essential for recognizing and coping with the risk of
collision as it presented itself that early morning
when the “Don Carlos,” running at maximum speed
and having just overtaken the “Don Francisco” then
approximately one mile behind to the right side of the
“Don Carlos,” found itself head-on or nearly head
on vis-a-vis the “Yotai Maru. ” It is essential to point
out that this situation was created by the “Don
Carlos” itself.
FOR ALL THE FOREGOING, the Decision of the
Court of Appeals is hereby REVERSED and SET
ASIDE.
7
Stonehill vs Diokno
20 SCRA 383
Facts: Respondents herein secured a total of 42
search warrants against petitioners herein and/or the
corporations of which they were officers, to search
“books of accounts, financial records, vouchers,
correspondence, receipts, ledgers, journals,
portfolios, credit journals, typewriters, and other
documents and/or papers showing all business
transactions including disbursements receipts,
balance sheets and profit and loss statements and
Bobbins (cigarette wrappers),” as “the subject of the
offense; stolen or embezzled and proceeds or fruits
of the offense,” or “used or intended to be used as the
means of committing the offense,” which is
described in the applications adverted to above as
“violation of Central Bank Laws, Tariff and Customs
Laws, Internal Revenue (Code) and the Revised
Penal Code.”
The petitioner contended that the search warrants are
null and void as their issuance violated the
Constitution and the Rules of Court for being general
warrants.
The documents, papers, and things seized under the
alleged authority of the warrants in question may be
split into two (2) major groups, namely: (a) those
found and seized in the offices of the aforementioned
corporations, and (b) those found and seized in the
residences of petitioners herein.
Issue: Whether petitioners can validly assail the
search warrant against the corporation.
Held: No. As regards the first group, we hold that
petitioners herein have no cause of action to assail
the legality of the contested warrants and of the
seizures made in pursuance thereof, for the simple
reason that said corporations have their respective
personalities, separate and distinct from the
personality of herein petitioners, regardless of the
amount of shares of stock or of the interest of each of
them in said corporations, and whatever the offices
they hold therein may be. Indeed, it is well settled
that the legality of a seizure can be contested only by
the party whose rights have been impaired thereby,
and that the objection to an unlawful search and
seizure is purely personal and cannot be availed of
by third parties. Consequently, petitioners herein
may not validly object to the use in evidence against
them of the documents, papers and things seized
from the offices and premises of the corporations
adverted to above, since the right to object to the
admission of said papers in evidence belongs
exclusively to the corporations, to whom the seized
effects belong, and may not be invoked by the
corporate officers in proceedings against them in
their individual capacity.

Bache & Co Inc vs. Ruiz
GR L-32409, 27 February 1971
Facts: On 24 February 1970, Misael P. Vera,
Commissioner of Internal Revenue, wrote a letter
addressed to Judge Vivencio M. Ruiz requesting the
issuance of a search warrant against Bache & Co.
(Phil.), Inc. and Frederick E. Seggerman for violation
of Section 46(a) of the National Internal Revenue
Code (NIRC), in relation to all other pertinent
provisions thereof, particularly Sections 53, 72, 73,
208 and 209, and authorizing Revenue Examiner
Rodolfo de Leon to make and file the application for
search warrant which was attached to the letter.
In the afternoon of the following day, De Leon and
his witness, Arturo Logronio, went to the Court of
First Instance (CFI) of Rizal. They brought with
them the following papers: Vera’s letter-request; an
application for search warrant already filled up but
still unsigned by De Leon; an affidavit of Logronio
subscribed before De Leon; a deposition in printed
form of Logronio already accomplished and signed
by him but not yet subscribed; and a search warrant
already accomplished but still unsigned by Judge. At
that time the Judge was hearing a certain case; so, by
means of a note, he instructed his Deputy Clerk of
Court to take the depositions of De Leon and
Logronio.
After the session had adjourned, the Judge was
informed that the depositions had already been taken.
The stenographer, upon request of the Judge, read to
him her stenographic notes; and thereafter, the Judge
asked Logronio to take the oath and warned him that
if his deposition was found to be false and without
legal basis, he could be charged for perjury.
The Judge signed de Leon’s application for search
warrant and Logronio’s deposition. Search Warrant
2-M-70 was then signed by Judge and accordingly
issued. 3 days later (a Saturday), the BIR agents
served the search warrant to the corporation and
Seggerman at the offices of the corporation on Ayala
Avenue, Makati, Rizal.
The corporation’s lawyers protested the search on the
ground that no formal complaint or transcript of
testimony was attached to the warrant. The agents
nevertheless proceeded with their search which
yielded 6 boxes of documents.
On 3 March 1970, the corporation and Seggerman
filed a petition with the Court of First Instance (CFI)
of Rizal praying that the search warrant be quashed,
dissolved or recalled, that preliminary prohibitory
and mandatory writs of injunction be issued, that the
search warrant be declared null and void, and that
Vera, Logronio, de Leon, et. al., be ordered to pay
8
the corporation and Seggerman, jointly and
severally, damages and attorney’s fees.
After hearing and on 29 July 1970, the court issued
an order dismissing the petition for dissolution of the
search warrant. In the meantime, or on 16 April 1970,
the Bureau of Internal Revenue made tax
assessments on the corporation in the total sum of
P2,594,729.97, partly, if not entirely, based on the
documents thus seized.
The corporation and Seggerman filed an action for
certiorari, prohibition, and mandamus.
Issue: Whether the corporation has the right to
contest the legality of the seizure of documents from
its office.
Held: The legality of a seizure can be contested only
by the party whose rights have been impaired
thereby, and that the objection to an unlawful search
and seizure is purely personal and cannot be availed
of by third parties. In Stonehill, et al. vs. Diokno, et
al. (GR L-19550, 19 June 1967; 20 SCRA 383) the
Supreme Court impliedly recognized the right of a
corporation to object against unreasonable searches
and seizures; holding that the corporations have their
respective personalities, separate and distinct from
the personality of the corporate officers, regardless
of the amount of shares of stock or the interest of
each of them in said corporations, whatever, the
offices they hold therein may be; and that the
corporate officers therefore may not validly object to
the use in evidence against them of the documents,
papers and things seized from the offices and
premises of the corporations, since the right to object
to the admission of said papers in evidence belongs
exclusively to the corporations, to whom the seized
effects belong, and may not be invoked by the
corporate officers in proceedings against them in
their individual capacity.
The distinction between the Stonehill case and the
present case is that: in the former case, only the
officers of the various corporations in whose offices
documents, papers and effects were searched and
seized were the petitioners; while in the latter, the
corporation to whom the seized documents belong,
and whose rights have thereby been impaired, is
itself a petitioner.
On that score, the corporation herein stands on a
different footing from the corporations in Stonehill.
Moreover, herein, the search warrant was void
inasmuch as First, there was no personal examination
conducted by the Judge of the complainant (De
Leon) and his witness (Logronio).
The Judge did not ask either of the two any question
the answer to which could possibly be the basis for
determining whether or not there was probable cause
against Bache & Co. and Seggerman. The
participation of the Judge in the proceedings which
led to the issuance of Search Warrant 2-M-70 was
thus limited to listening to the stenographer’s
readings of her notes, to a few words of warning
against the commission of perjury, and to
administering the oath to the complainant and his
witness. This cannot be consider a personal
examination.
Second, the search warrant was issued for more than
one specific offense. The search warrant was issued
for at least 4 distinct offenses under the Tax Code.
The first is the violation of Section 46(a), Section 72
and Section 73 (the filing of income tax returns),
which are interrelated. The second is the violation of
Section 53 (withholding of income taxes at source).
The third is the violation of Section 208 (unlawful
pursuit of business or occupation); and the fourth is
the violation of Section 209 (failure to make a return
of receipts, sales, business or gross value of output
actually removed or to pay the tax due thereon). Even
in their classification the 6 provisions are embraced
in 2 different titles: Sections 46(a), 53, 72 and 73 are
under Title II (Income Tax); while Sections 208 and
209 are under Title V (Privilege Tax on Business and
Occupation).
Lastly, the search warrant does not particularly
describe the things to be seized. Search Warrant No.
2-M-70 tends to defeat the major objective of the Bill
of Rights, i.e., the elimination of general warrants,
for the language used therein is so all-embracing as
to include all conceivable records of the corporation,
which, if seized, could possibly render its business
inoperative. Thus, Search Warrant 2-M-70 is null
and void.
-Liability for Torts
Philippine National Bank vs. Court of Appeals
et. al.
83 SCRA 237 – Business Organization –
Corporation Law – Corporation’s Liability for
Negligence
Facts: Rita Tapnio owes PNB an amount of
P2,000.00. The amount is secured by her sugar crops
about to be harvested including her export quota
allocation worth 1,000 piculs. The said export quota
was later dealt by Tapnio to a certain Jacobo Tuazon
at P2.50 per picul or a total of P2,500. Since the
subject of the deal is mortgaged with PNB, the latter
has to approve it. The branch manager of PNB
recommended that the price should be at P2.80 per
picul which was the prevailing minimum amount
allowable. Tapnio and Tuazon agreed to the said
amount. And so the bank manager recommended the
agreement to the vice president of PNB. The vice
9
president in turn recommended it to the board of
directors of PNB.
However, the Board of Directors wanted to raise the
price to P3.00 per picul. This Tuazon does not want
hence he backed out from the agreement. This
resulted to Tapnio not being able to realize profit and
at the same time rendered her unable to pay her
P2,000.00 crop loan which would have been covered
by her agreement with Tuazon.
Eventually, Tapnio was sued by her other creditors
and Tapnio filed a third party complaint against PNB
where she alleged that her failure to pay her debts
was because of PNB’s negligence and
unreasonableness.
ISSUE: Whether or not Tapnio is correct.
HELD: Yes. In this type of transaction, time is of the
essence considering that Tapnio’s sugar quota for
said year needs to be utilized ASAP otherwise her
allotment may be assigned to someone else, and if
she can’t use it, she won’t be able to export her crops.
It is unreasonable for PNB’s board of directors to
disallow the agreement between Tapnio and Tuazon
because of the mere difference of 0.20 in the agreed
price rate. What makes it more unreasonable is the
fact that the P2.80 was recommended both by the
bank manager and PNB’s VP yet it was disapproved
by the board. Further, the P2.80 per picul rate is the
minimum allowable rate pursuant to prevailing
market trends that time. This unreasonable stand
reflects PNB’s lack of the reasonable degree of care
and vigilance in attending to the matter. PNB is
therefore negligent.
A corporation is civilly liable in the same manner as
natural persons for torts, because “generally
speaking, the rules governing the liability of a
principal or master for a tort committed by an agent
or servant are the same whether the principal or
master be a natural person or a corporation, and
whether the servant or agent be a natural or artificial
person. All of the authorities agree that a principal or
master is liable for every tort which it expressly
directs or authorizes, and this is just as true of a
corporation as of a natural person, a corporation is
liable, therefore, whenever a tortious act is
committed by an officer or agent under express
direction or authority from the stockholders or
members acting as a body, or, generally, from the
directors as the governing body.”
g. Criminal Liability
 THE PEOPLE OF THE PHILIPPINE
ISLANDS, vs. TAN BOON KONG,
G.R. No. 32652, Mar 15, 1930
FACTS:
On and during the four quarters of the year 1924, in
Municipality of Iloilo, Province of Iloilo, the
defendant, as manager of the Visayan General
Supply Co., Inc., a corporation organized under the
laws of the Philippine Islands and engaged in the
purchase and sale of sugar, `bayon,’ coprax, and
other native products and as such subject to the
payment of internal-revenue taxes upon its sales,
declared in 1924 for purpose of taxation only the sum
of P2,352,761.94, when in truth and in fact, and the
accused knew that the total gross sales of said
corporation during that year amounted to
P2,543,303.44, thereby failing to declare
P190,541.50, and voluntarily not paying the
percentage taxes the sum of P2,960.12,
corresponding to 1½ per cent of said undeclared
sales.
ISSUE: WON the defendant, as manager of the
corporation, is criminally liable for violation of the
tax law for the benefit of said corporation.
RULING: A corporation can act only through its
officers and agents, and where the business itself
involves a violation of the law, all who participate in
it are liable
In case of State vs. Burnam (71 Wash., 199), the
court hold that the manager of a dairy corporation
was criminally liable for the violation of a statute by
the corporation though he was not present when the
offense was committed.
In the present case the information alleges that the
defendant was the manager of a corporation which
was engaged in business as a merchant, and as such
manager, he made a false return, for purposes of
taxation, of the total amount of sales made by said
corporation during the year 1924. As the filing of
such false return constitutes a violation of law, the
defendant, as the author of the illegal act, must
necessarily answer for its consequences, provided
that the allegations are proven.
The ruling of the court below sustaining the demurrer
to the complaint is therefore reversed, and the case
will be returned to said court for further proceedings
not inconsistent with our view as hereinbefore stated.
Espiritu v. Petron Corp.
625 SCRA 245
ABAD, J.:
10
This case is about the offense or offenses that arise
from the reloading of the liquefied petroleum gas
cylinder container of one brand with the liquefied
petroleum gas of another brand.
The Facts and the Case
Respondent Petron Corporation (Petron) sold and
distributed liquefied petroleum gas (LPG) in cylinder
tanks that carried its trademark Gasul.[1] Respondent
Carmen J. Doloiras owned and operated Kristina
Patricia Enterprises (KPE), the exclusive distributor
of Gasul LPGs in the whole of Sorsogon.[2] Jose
Nelson Doloiras (Jose) served as KPEs manager.
Bicol Gas Refilling Plant Corporation (Bicol Gas)
was also in the business of selling and distributing
LPGs in Sorsogon but theirs carried the trademark
Bicol Savers Gas. Petitioner Audie Llona managed
Bicol Gas.
In the course of trade and competition, any given
distributor of LPGs at times acquired possession of
LPG cylinder tanks belonging to other distributors
operating in the same area. They called these
captured cylinders. According to Jose, KPEs
manager, in April 2001 Bicol Gas agreed with KPE
for the swapping of captured cylinders since one
distributor could not refill captured cylinders with its
own brand of LPG. At one time, in the course of
implementing this arrangement, KPEs Jose visited
the Bicol Gas refilling plant. While there, he noticed
several Gasul tanks in Bicol Gas possession. He
requested a swap but Audie Llona of Bicol Gas
replied that he first needed to ask the permission of
the Bicol Gas owners. That permission was given
and they had a swap involving around 30 Gasul tanks
held by Bicol Gas in exchange for assorted tanks held
by KPE.
KPEs Jose noticed, however, that Bicol Gas still had
a number of Gasul tanks in its yard. He offered to
make a swap for these but Llona declined, saying the
Bicol Gas owners wanted to send those tanks to
Batangas. Later Bicol Gas told Jose that it had no
more Gasul tanks left in its possession. Jose observed
on almost a daily basis, however, that Bicol Gas
trucks which plied the streets of the province carried
a load of Gasul tanks. He noted that KPEs volume of
sales dropped significantly from June to July 2001.
On August 4, 2001 KPEs Jose saw a particular Bicol
Gas truck on the Maharlika Highway. While the
truck carried mostly Bicol Savers LPG tanks, it had
on it one unsealed 50-kg Gasul tank and one 50-kg
Shellane tank. Jose followed the truck and when it
stopped at a store, he asked the driver, Jun Leorena,
and the Bicol Gas sales representative, Jerome Misal,
about the Gasul tank in their truck. They said it was
empty but, when Jose turned open its valve, he noted
that it was not. Misal and Leorena then admitted that
the Gasul and Shellane tanks on their truck belonged
to a customer who had them filled up by Bicol Gas.
Misal then mentioned that his manager was a certain
Rolly Mirabena.
Because of the above incident, KPE filed a
complaint[3] for violations of Republic Act (R.A.)
623 (illegally filling up registered cylinder tanks), as
amended, and Sections 155 (infringement of trade
marks) and 169.1 (unfair competition) of the
Intellectual Property Code (R.A. 8293). The
complaint charged the following: Jerome Misal, Jun
Leorena, Rolly Mirabena, Audie Llona, and several
John and Jane Does, described as the directors,
officers, and stockholders of Bicol Gas. These
directors, officers, and stockholders were eventually
identified during the preliminary investigation.
Subsequently, the provincial prosecutor ruled that
there was probable cause only for violation of R.A.
623 (unlawfully filling up registered tanks) and that
only the four Bicol Gas employees, Mirabena, Misal,
Leorena, and petitioner Llona, could be charged. The
charge against the other petitioners who were the
stockholders and directors of the company was
dismissed.
Dissatisfied, Petron and KPE filed a petition for
review with the Office of the Regional State
Prosecutor, Region V, which initially denied the
petition but partially granted it on motion for
reconsideration. The Office of the Regional State
Prosecutor ordered the filing of additional
informations against the four employees of Bicol Gas
for unfair competition. It ruled, however, that no case
for trademark infringement was present. The
Secretary of Justice denied the appeal of Petron and
KPE and their motion for reconsideration.
Undaunted, Petron and KPE filed a special civil
action for certiorari with the Court of Appeals[4] but
the Bicol Gas employees and stockholders concerned
opposed it, assailing the inadequacy in its certificate
of non-forum shopping, given that only Atty. Joel
Angelo C. Cruz signed it on behalf of Petron. In its
Decision[5] dated October 17, 2005, the Court of
Appeals ruled, however, that Atty. Cruzs
certification constituted sufficient compliance. As to
the substantive aspect of the case, the Court of
Appeals reversed the Secretary of Justices ruling. It
held that unfair competition does not necessarily
absorb trademark infringement. Consequently, the
court ordered the filing of additional charges of
trademark infringement against the concerned Bicol
Gas employees as well.
Since the Bicol Gas employees presumably acted
under the direct order and control of its owners, the
Court of Appeals also ordered the inclusion of the
stockholders of Bicol Gas in the various charges,
bringing to 16 the number of persons to be charged,
11
now including petitioners Manuel C. Espiritu, Jr.,
Freida F. Espiritu, Carlo F. Espiritu, Rafael F.
Espiritu, Rolando M. Mirabuna, Hermilyn A.
Mirabuna, Kim Roland A. Mirabuna, Kaye Ann A.
Mirabuna, Ken Ryan A. Mirabuna, Juanito P. de
Castro, Geronima A. Almonite, and Manuel C. Dee
(together with Audie Llona), collectively, petitioners
Espiritu, et al. The court denied the motion for
reconsideration of these employees and stockholders
in its Resolution dated January 6, 2006, hence, the
present petition for review[6] before this Court.
The Issues Presented
The petition presents the following issues:
1. Whether or not the certificate of non-forum
shopping that accompanied the petition filed with the
Court of Appeals, signed only by Atty. Cruz on
behalf of Petron, complied with what the rules
require;
2. Whether or not the facts of the case warranted the
filing of charges against the Bicol Gas people for:
a) Filling up the LPG tanks registered to
another manufacturer without the latters
consent in violation of R.A. 623, as amended;
b) Trademark infringement consisting in
Bicol Gas use of a trademark that is
confusingly similar to Petrons registered
Gasul trademark in violation of section 155
also of R.A. 8293; and
c) Unfair competition consisting in passing
off Bicol Gas-produced LPGs for Petron-
produced Gasul LPG in violation of Section
168.3 of R.A. 8293.
The Courts Rulings
First. Petitioners Espiritu, et al. point out that the
certificate of non-forum shopping that respondents
KPE and Petron attached to the petition they filed
with the Court of Appeals was inadequate, having
been signed only by Petron, through Atty. Cruz.
But, while procedural requirements such as that of
submittal of a certificate of non-forum shopping
cannot be totally disregarded, they may be deemed
substantially complied with under justifiable
circumstances.[7] One of these circumstances is
where the petitioners filed a collective action in
which they share a common interest in its subject
matter or raise a common cause of action. In such a
case, the certification by one of the petitioners may
be deemed sufficient.[8]
Here, KPE and Petron shared a common cause of
action against petitioners Espiritu, et al., namely, the
violation of their proprietary rights with respect to
the use of Gasul tanks and trademark. Furthermore,
Atty. Cruz said in his certification that he was
executing it for and on behalf of the Corporation, and
co-petitioner Carmen J. Doloiras.[9] Thus, the object
of the requirement to ensure that a party takes no
recourse to multiple forums was substantially
achieved. Besides, the failure of KPE to sign the
certificate of non-forum shopping does not render the
petition defective with respect to Petron which
signed it through Atty. Cruz.[10] The Court of
Appeals, therefore, acted correctly in giving due
course to the petition before it.
Second. The Court of Appeals held that under the
facts of the case, there is probable cause that
petitioners Espiritu, et al. committed all three crimes:
(a) illegally filling up an LPG tank registered to
Petron without the latters consent in violation of R.A.
623, as amended; (b) trademark infringement which
consists in Bicol Gas use of a trademark that is
confusingly similar to Petrons registered Gasul
trademark in violation of Section 155 of R.A. 8293;
and (c) unfair competition which consists in
petitioners Espiritu, et al. passing off Bicol Gas-
produced LPGs for Petron-produced Gasul LPG in
violation of Section 168.3 of R.A. 8293.
Here, the complaint adduced at the preliminary
investigation shows that the one 50-kg Petron Gasul
LPG tank found on the Bicol Gas truck belonged to
[a Bicol Gas] customer who had the same filled up
by BICOL GAS.[11] In other words, the customer
had that one Gasul LPG tank brought to Bicol Gas
for refilling and the latter obliged.
R.A. 623, as amended,[12] punishes any person who,
without the written consent of the manufacturer or
seller of gases contained in duly registered steel
cylinders or tanks, fills the steel cylinder or tank, for
the purpose of sale, disposal or trafficking, other than
the purpose for which the manufacturer or seller
registered the same. This was what happened in this
case, assuming the allegations of KPEs manager to
be true. Bicol Gas employees filled up with their
firms gas the tank registered to Petron and bearing its
mark without the latters written authority.
Consequently, they may be prosecuted for that
offense.
But, as for the crime of trademark infringement,
Section 155 of R.A. 8293 (in relation to Section
170[13]) provides that it is committed by any person
who shall, without the consent of the owner of the
registered mark:
1. Use in commerce any reproduction, counterfeit,
copy or colorable imitation of a registered mark or
the same container or a dominant feature thereof in
connection with the sale, offering for sale,
distribution, advertising of any goods or services
12
including other preparatory steps necessary to carry
out the sale of any goods or services on or in
connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive; or
2. Reproduce, counterfeit, copy or colorably imitate
a registered mark or a dominant feature thereof and
apply such reproduction, counterfeit, copy or
colorable imitation to labels, signs, prints, packages,
wrappers, receptacles or advertisements intended to
be used in commerce upon or in connection with the
sale, offering for sale, distribution, or advertising of
goods or services on or in connection with which
such use is likely to cause confusion, or to cause
mistake, or to deceive.
KPE and Petron have to show that the alleged
infringer, the responsible officers and staff of Bicol
Gas, used Petrons Gasul trademark or a confusingly
similar trademark on Bicol Gas tanks with intent to
deceive the public and defraud its competitor as to
what it is selling.[14] Examples of this would be the
acts of an underground shoe manufacturer in
Malabon producing Nike branded rubber shoes or the
acts of a local shirt company with no connection to
La Coste, producing and selling shirts that bear the
stitched logos of an open-jawed alligator.
Here, however, the allegations in the complaint do
not show that Bicol Gas painted on its own tanks
Petrons Gasul trademark or a confusingly similar
version of the same to deceive its customers and
cheat Petron. Indeed, in this case, the one tank
bearing the mark of Petron Gasul found in a truck full
of Bicol Gas tanks was a genuine Petron Gasul tank,
more of a captured cylinder belonging to
competition. No proof has been shown that Bicol Gas
has gone into the business of distributing imitation
Petron Gasul LPGs.
As to the charge of unfair competition, Section 168.3
(a) of R.A. 8293 (also in relation to Section 170)
describes the acts constituting the offense as follows:
168.3. In particular, and without in
any way limiting the scope of
protection against unfair competition,
the following shall be deemed guilty
of unfair competition:
(a) Any person, who is selling his
goods and gives them the general
appearance of goods of another
manufacturer or dealer, either as to
the goods themselves or in the
wrapping of the packages in which
they are contained, or the devices or
words thereon, or in any other feature
of their appearance, which would be
likely to influence purchasers to
believe that the goods offered are
 those of a manufacturer or dealer,
other than the actual manufacturer or
dealer, or who otherwise clothes the
goods with such appearance as shall
deceive the public and defraud
another of his legitimate trade, or any
subsequent vendor of such goods or
any agent of any vendor engaged in
selling such goods with a like
purpose;
Essentially, what the law punishes is the act of giving
ones goods the general appearance of the goods of
another, which would likely mislead the buyer into
believing that such goods belong to the latter.
Examples of this would be the act of manufacturing
or selling shirts bearing the logo of an alligator,
similar in design to the open-jawed alligator in La
Coste shirts, except that the jaw of the alligator in the
former is closed, or the act of a producer or seller of
tea bags with red tags showing the shadow of a black
dog when his competitor is producing or selling
popular tea bags with red tags showing the shadow
of a black cat.
Here, there is no showing that Bicol Gas has been
giving its LPG tanks the general appearance of the
tanks of Petrons Gasul. As already stated, the
truckfull of Bicol Gas tanks that the KPE manager
arrested on a road in Sorsogon just happened to have
mixed up with them one authentic Gasul tank that
belonged to Petron.
The only point left is the question of the liability of
the stockholders and members of the board of
directors of Bicol Gas with respect to the charge of
unlawfully filling up a steel cylinder or tank that
belonged to Petron. The Court of Appeals ruled that
they should be charged along with the Bicol Gas
employees who were pointed to as directly involved
in overt acts constituting the offense.
Bicol Gas is a corporation. As such, it is an entity
separate and distinct from the persons of its officers,
directors, and stockholders. It has been held,
however, that corporate officers or employees,
through whose act, default or omission the
corporation commits a crime, may themselves be
individually held answerable for the crime.[15]
Jose claimed in his affidavit that, when he negotiated
the swapping of captured cylinders with Bicol Gas,
its manager, petitioner Audie Llona, claimed that he
would be consulting with the owners of Bicol Gas
about it. Subsequently, Bicol Gas declined the offer
to swap cylinders for the reason that the owners
wanted to send their captured cylinders to Batangas.
The Court of Appeals seized on this as evidence that
the employees of Bicol Gas acted under the direct
orders of its owners and that the owners of Bicol Gas
13
have full control of the operations of the
business.[16]
The owners of a corporate organization are its
stockholders and they are to be distinguished from its
directors and officers. The petitioners here, with the
exception of Audie Llona, are being charged in their
capacities as stockholders of Bicol Gas. But the
Court of Appeals forgets that in a corporation, the
management of its business is generally vested in its
board of directors, not its stockholders.[17]
Stockholders are basically investors in a corporation.
They do not have a hand in running the day-to-day
business operations of the corporation unless they are
at the same time directors or officers of the
corporation. Before a stockholder may be held
criminally liable for acts committed by the
corporation, therefore, it must be shown that he had
knowledge of the criminal act committed in the name
of the corporation and that he took part in the same
or gave his consent to its commission, whether by
action or inaction.
The finding of the Court of Appeals that the
employees could not have committed the crimes
without the consent, [abetment], permission, or
participation of the owners of Bicol Gas[18] is a
sweeping speculation especially since, as
demonstrated above, what was involved was just one
Petron Gasul tank found in a truck filled with Bicol
Gas tanks. Although the KPE manager heard
petitioner Llona say that he was going to consult the
owners of Bicol Gas regarding the offer to swap
additional captured cylinders, no indication was
given as to which Bicol Gas stockholders Llona
consulted. It would be unfair to charge all the
stockholders involved, some of whom were proved
to be minors.[19] No evidence was presented
establishing the names of the stockholders who were
charged with running the operations of Bicol Gas.
The complaint even failed to allege who among the
stockholders sat in the board of directors of the
company or served as its officers.
The Court of Appeals of course specifically
mentioned petitioner stockholder Manuel C.
Espiritu, Jr. as the registered owner of the truck that
the KPE manager brought to the police for
investigation because that truck carried a tank of
Petron Gasul. But the act that R.A. 623 punishes is
the unlawful filling up of registered tanks of another.
It does not punish the act of transporting such tanks.
And the complaint did not allege that the truck owner
connived with those responsible for filling up that
Gasul tank with Bicol Gas LPG.
WHEREFORE, the Court REVERSES and SETS
ASIDE the Decision of the Court of Appeals in CA-
G.R. SP 87711 dated October 17, 2005 as well as its
Resolution dated January 6, 2006, the Resolutions of
the Secretary of Justice dated March 11, 2004 and
August 31, 2004, and the Order of the Office of the
Regional State Prosecutor, Region V, dated February
19, 2003. The Court REINSTATES the Resolution
of the Office of the Provincial Prosecutor of
Sorsogon in I.S. 2001-9231 (inadvertently referred in
the Resolution itself as I.S. 2001-9234), dated
February 26, 2002. The names of petitioners Manuel
C. Espiritu, Jr., Freida F. Espititu, Carlo F. Espiritu,
Rafael F. Espiritu, Rolando M. Mirabuna, Hermilyn
A. Mirabuna, Kim Roland A. Mirabuna, Kaye Ann
A. Mirabuna, Ken Ryan A. Mirabuna, Juanito P. De
Castro, Geronima A. Almonite and Manuel C. Dee
are ORDERED excluded from the charge.
SO ORDERED.
h. Entitlement to Moral Damages
ABS-CBN Broadcasting Corporation vs Court of
Appeals
301 SCRA 572 – Business Organization –
Corporation Law – Delegation of Corporate
Powers – Moral Damages
In 1992, ABS-CBN Broadcasting Corporation,
through its vice president Charo Santos-Concio,
requested Viva Production, Inc. to allow ABS-CBN
to air at least 14 films produced by Viva. Pursuant to
this request, a meeting was held between Viva’s
representative (Vicente Del Rosario) and ABS-
CBN’s Eugenio Lopez (General Manager) and
Santos-Concio was held on April 2, 1992. During the
meeting Del Rosario proposed a film package which
will allow ABS-CBN to air 104 Viva films for P60
million. Later, Santos-Concio, in a letter to Del
Rosario, proposed a counterproposal of 53 films
(including the 14 films initially requested) for P35
million. Del Rosario presented the counter offer to
Viva’s Board of Directors but the Board rejected the
counter offer. Several negotiations were
subsequently made but on April 29, 1992, Viva made
an agreement with Republic Broadcasting
Corporation (referred to as RBS – or GMA 7) which
gave exclusive rights to RBS to air 104 Viva films
including the 14 films initially requested by ABS-
CBN.
ABS-CBN now filed a complaint for specific
performance against Viva as it alleged that there is
already a perfected contract between Viva and ABS-
CBN in the April 2, 1992 meeting. Lopez testified
that Del Rosario agreed to the counterproposal and
he (Lopez) even put the agreement in a napkin which
was signed and given to Del Rosario. ABS-CBN also
filed an injunction against RBS to enjoin the latter
from airing the films. The injunction was granted.
RBS now filed a countersuit with a prayer for moral
damages as it claimed that its reputation was debased
when they failed to air the shows that they promised
to their viewers. RBS relied on the ruling in People
14
vs Manero and Mambulao Lumber vs PNB which
states that a corporation may recover moral damages
if it “has a good reputation that is debased, resulting
in social humiliation”. The trial court ruled in favor
of Viva and RBS. The Court of Appeals affirmed the
trial court.
ISSUE:
1. Whether or not a contract was perfected in
the April 2, 1992 meeting between the
representatives of the two corporations.
2. Whether or not a corporation, like RBS, is
entitled to an award of moral damages upon
grounds of debased reputation.
HELD:
1. No. There is no proof that a contract was perfected
in the said meeting. Lopez’ testimony about the
contract being written in a napkin is not corroborated
because the napkin was never produced in court.
Further, there is no meeting of the minds because Del
Rosario’s offer was of 104 films for P60 million was
not accepted. And that the alleged counter-offer
made by Lopez on the same day was not also
accepted because there’s no proof of such. The
counter offer can only be deemed to have been made
days after the April 2 meeting when Santos-Concio
sent a letter to Del Rosario containing the counter-
offer. Regardless, there was no showing that Del
Rosario accepted. But even if he did accept, such
acceptance will not bloom into a perfected contract
because Del Rosario has no authority to do so.
As a rule, corporate powers, such as the power; to
enter into contracts; are exercised by the Board of
Directors. But this power may be delegated to a
corporate committee, a corporate officer or corporate
manager. Such a delegation must be clear and
specific. In the case at bar, there was no such
delegation to Del Rosario. The fact that he has to
present the counteroffer to the Board of Directors of
Viva is proof that the contract must be accepted first
by the Viva’s Board. Hence, even if Del Rosario
accepted the counter-offer, it did not result to a
contract because it will not bind Viva sans
authorization.
2. No. The award of moral damages cannot be
granted in favor of a corporation because, being an
artificial person and having existence only in legal
contemplation, it has no feelings, no emotions, no
senses, It cannot, therefore, experience physical
suffering and mental anguish, which call be
experienced only by one having a nervous
system. No moral damages can be awarded to a
juridical person. The statement in the case of People
vs Manero and Mambulao Lumber vs PNB is a mere
obiter dictum hence it is not binding as
jurisprudence.
 i. Nationality of Corporations
i. Tests of Nationality
1. Place of Incorporation Test
2. Control Test
3. War time Test
4. Investment Test and the
Grandfather Rule
ii. Forein Investments Act of 1991
iii. Register of Deeds vvs. Ung Sui Si
Temple
RD OF RIZAL vs. UNG SIU SI TEMPLE
G.R. No. L-6776; May 21, 1955
FACTS: The Register of Deeds for the province of
Rizal refused to accept for record a deed of donation
executed in due form on January 22, 1953, by Jesus
Dy, a Filipino citizen, conveying a parcel of
residential land, in Caloocan, Rizal, known as lot No.
2, block 48-D, PSD-4212, G.L.R.O. Record No.
11267, in favor of the unregistered religious
organization “Ung Siu Si Temple”, operating
through three trustees all of Chinese nationality. The
donation was duly accepted by Yu Juan, of Chinese
nationality, founder and deaconess of the Temple,
acting in representation and in behalf of the latter and
its trustees.
CFI upheld the action of the Rizal Register of
Deeds. Basis: sections 1 and 5 of Article XIII of the
Constitution of the Philippines limiting the
acquisition of land in the Philippines to its citizens,
or to corporations or associations at least sixty per
centum of the capital stock of which is owned by
such citizens adopted after the enactment of said Act
No. 271, and the decision of the Supreme Court in
the case of Krivenko vs. the Register of Deeds of
Manila, the deed of donation in question should not
be admitted for admitted for registration.
Not satisfied with the ruling of the Court of First
Instance, counsel for the donee Uy Siu Si Temple has
appealed to this Court, claiming: (1) that the
acquisition of the land in question, for religious
purposes, is authorized and permitted by Act No. 271
of the old Philippine Commission, providing as
follows:
SECTION 1. It shall be lawful for all
religious associations, of whatever sort or
denomination, whether incorporated in the
Philippine Islands or in the name of other
country, or not incorporated at all, to hold
land in the Philippine Islands upon which to
build churches, parsonages, or educational or
charitable institutions.
15
SEC. 2. Such religious institutions, if not
incorporated, shall hold the land in the name
of three Trustees for the use of such
associations; . . .. (Printed Rec. App. p. 5.)
and (2) that the refusal of the Register of
Deeds violates the freedom of religion clause
of our Constitution [Art. III, Sec. 1(7)].
ISSUE: whether a deed of donation of a parcel of
land executed in favor of a religious organization
whose founder, trustees and administrator are
Chinese citizens should be registered or not.
HELD: The provisions of Act No. 271 of the old
Philippine Commission must be deemed repealed
since the Constitution was enacted, in so far as
incompatible therewith. In providing that, — Save in
cases of hereditary succession, no private
agricultural land shall be transferred or assigned
except to individuals, corporations or associations
qualified to acquire or hold lands of the public
domain in the Philippines,
The Constitution makes no exception in favor of
religious associations.
The fact that the appellant religious organization has
no capital stock does not suffice to escape the
Constitutional inhibition, since it is admitted that its
members are of foreign nationality. To permit
religious associations controlled by non-Filipinos to
acquire agricultural lands would be to drive the
opening wedge to revive alien religious land
holdings in this country.
The resolution appealed from is affirmed, with
costs against appellant.
iv. Roman Catholic Administrator of
Davao, Inc. vs. The LRC
Roman Catholic Apostolic Administrator of
Davao, Inc. v. The Land Registration
Commission and the Register of Deeds of Davao
City, G.R. No. L-8451, December 20,1957
Facts: On October 4, 1954, Mateo L. Rodis, a
Filipino citizen and resident of the City of Davao,
executed a deed of sale of a parcel of land located in
the same city covered by Transfer Certificate No.
2263, in favor of the Roman Catholic Apostolic
Administrator of Davao Inc.,(RCADI) is corporation
sole organized and existing in accordance with
Philippine Laws, with Msgr. Clovis Thibault, a
Canadian citizen, as actual incumbent. Registry of
Deeds Davao (RD) required RCADI to submit
affidavit declaring that 60% of its members were
Filipino Citizens. As the RD entertained some
doubts as to the registerability of the deed of sale, the
matter was referred to the Land Registration
Commissioner (LRC) en consulta for resolution.
LRC hold that pursuant to provisions of sections 1
and 5 of Article XII of the Philippine Constitution,
RCADI is not qualified to acquire land in the
Philippines in the absence of proof that at leat 60%
of the capital, properties or assets of the RCADI is
actually owned or controlled by Filipino citizens.
LRC also denied the registration of the Deed of Sale
in the absence of proof of compliance with such
requisite. RCADI’s Motion for Reconsideration was
denied. Aggrieved, the latter filed a petition for
mandamus.
Issue: Whether or not the Universal Roman
Catholic Apostolic Church in the Philippines, or
better still, the corporation sole named the Roman
Catholic Apostolic Administrator of Davao, Inc., is
qualified to acquire private agricultural lands in the
Philippines pursuant to the provisions of Article
XIII of the Constitution.
Ruling: RCADI is qualified. While it is true and We
have to concede that in the profession of their faith,
the Roman Pontiff is the supreme head; that in the
religious matters, in the exercise of their belief, the
Catholic congregation of the faithful throughout the
world seeks the guidance and direction of their
Spiritual Father in the Vatican, yet it cannot be said
that there is a merger of personalities resultant
therein. Neither can it be said that the political and
civil rights of the faithful, inherent or acquired under
the laws of their country, are affected by that
relationship with the Pope. The fact that the Roman
Catholic Church in almost every country springs
from that society that saw its beginning in Europe
and the fact that the clergy of this faith derive their
authorities and receive orders from the Holy See do
not give or bestow the citizenship of the Pope upon
these branches. Citizenship is a political right which
cannot be acquired by a sort of “radiation”. We have
to realize that although there is a fraternity among all
the catholic countries and the dioceses therein all
over the globe, the universality that the word
“catholic” implies, merely characterize their faith, a
uniformity in the practice and the interpretation of
their dogma and in the exercise of their belief, but
certainly they are separate and independent from one
another in jurisdiction, governed by different laws
under which they are incorporated, and entirely
independent on the others in the management and
ownership of their temporalities. To allow theory
that the Roman Catholic Churches all over the world
follow the citizenship of their Supreme Head, the
Pontifical Father, would lead to the absurdity of
finding the citizens of a country who embrace the
Catholic faith and become members of that religious
society, likewise citizens of the Vatican or of Italy.
And this is more so if We consider that the Pope
16
himself may be an Italian or national of any other
country of the world. The same thing be said with
regard to the nationality or citizenship of the
corporation sole created under the laws of the
Philippines, which is not altered by the change of
citizenship of the incumbent bishops or head of said
corporation sole.
We must therefore, declare that although a branch
of the Universal Roman Catholic Apostolic Church,
every Roman Catholic Church in different
countries, if it exercises its mission and is lawfully
incorporated in accordance with the laws of the
country where it is located, is considered an entity
or person with all the rights and privileges granted
to such artificial being under the laws of that
country, separate and distinct from the personality
of the Roman Pontiff or the Holy See, without
prejudice to its religious relations with the latter
which are governed by the Canon Law or their rules
and regulations.
It has been shown before that: (1) the corporation
sole, unlike the ordinary corporations which are
formed by no less than 5 incorporators, is composed
of only one persons, usually the head or bishop of the
diocese, a unit which is not subject to expansion for
the purpose of determining any percentage
whatsoever; (2) the corporation sole is only
the administrator and not the owner of the
temporalities located in the territory comprised by
said corporation sole; (3) such temporalities are
administered for and on behalf of the faithful residing
in the diocese or territory of the corporation sole; and
(4) the latter, as such, has no nationality and the
citizenship of the incumbent Ordinary has nothing to
do with the operation, management or administration
of the corporation sole, nor effects the citizenship of
the faithful connected with their respective dioceses
or corporation sole.
In view of these peculiarities of the corporation
sole, it would seem obvious that when the specific
provision of the Constitution invoked by respondent
Commissioner (section 1, Art. XIII), was under
consideration, the framers of the same did not have
in mind or overlooked this particular form of
corporation. If this were so, as the facts and
circumstances already indicated tend to prove it to
be so, then the inescapable conclusion would be that
this requirement of at least 60 per cent of Filipino
capital was never intended to apply to corporations
sole, and the existence or not a vested right becomes
unquestionably immaterial.
People v. Quasha; G.R. No. L-6055; June 12, 1953
FACTS:
 William H. Quasha
 a member of the Philippine bar,
committed a crime of falsification of a
public and commercial document for
 causing it to appear that Arsenio Baylon,
a Filipino citizen, had subscribed to and
was the owner of 60.005 % of the
subscribed capital stock of Pacific
Airways Corp. (Pacific) when in reality
the money paid belongs to an American
citizen whose name did not appear in the
article of incorporation,
o to circumvent the constitutional
mandate that no corp. shall be
authorize to operate as a public
utility in the Philippines unless
60% of its capital stock is owned by
Filipinos.
 Found guilty after trial and sentenced to
a term of imprisonment and a fine
 Quasha appealed to this Court
 Primary purpose: to carry on the business of a
common carrier by air, land or water
 Baylon did not have the controlling vote
because of the difference in voting power
between the preferred shares and the common
shares
ISSUE: For a corporation to be entitled to operate a
public utility is it necessary that it be organized with
60 per cent of its capital owned by Filipinos from the
start?
HELD: No. For a corporation to be entitled to
operate a public utility it is not necessary that it be
organized with 60 per cent of its capital owned by
Filipinos from the start. A corporation formed with
capital that is entirely alien may subsequently change
the nationality of its capital through transfer of shares
to Filipino citizens. Conversely, a corporation
originally formed with Filipino capital may
subsequently change the national status of said
capital through transfer of shares to foreigners. What
need is there then for a corporation that intends to
operate a public utility to have, at the time of its
formation, 60 per cent of its capital owned by
Filipinos alone? That condition may anytime be
attained thru the necessary transfer of stocks. The
moment for determining whether a corporation is
entitled to operate as a public utility is when it applies
for a franchise, certificate, or any other form of
authorization for that purpose. And that can be done
after the corporation has already come into being and
not while it is still being formed. And at that moment,
the corporation must show that it has complied not
only with the requirement of the Constitution as to
the nationality of its capital, but also with the
requirements of the Civil Aviation Law if it is a
common carrier by air, the Revised Administrative
Code if it is a common carrier by water, and the
Public Service Law if it is a common carrier by land
or other kind of public service.
vi. Grandfather Rule – DOJ Opinion NO. 18,
s. 1989 (walang full text neto)
The conclusion that the Grandfather Rule "applies
only when the 60-40 Filipino-foreign equity
ownership is in doubt" is borne by that opinion’s
consideration of an earlier DOJ opinion (i.e., DOJ
Opinion No. 18, series of 1989). DOJ Opinion No.
20, series of 2005’s quotation of DOJ Opinion No.
18, series of 1989, reads:
x x x. It is quite clear x x x that the "Grandfather
Rule", which was evolved and applied by the SEC
in several cases, will not apply in cases where the
60-40 Filipino-alien equity ownership in a particular
natural resource corporation is not in doubt.
A full quotation of the same portion of DOJ
Opinion No. 18, series of 1989, reveals that the
statement quoted above was made in a very specific
context (i.e., a prior DOJ opinion) that necessitated
a clarification:
Opinion No. 84, s. 1988 cited in your query is not
meant to overrule the aforesaid SEC rule. There is
nothing in said Opinion that precludes the
application of the said SEC rule in appropriate
cases. It is quite clear from said SEC rule that the
‘Grandfather Rule’, which was evolved and applied
by the SEC in several cases, will not apply in cases
where the 60-40 Filipino-alien equity ownership in
a particular natural resource corporation is not in
doubt.
j. Classification of Corporations
i. Public, Private, and Quasi-Public
Corporations
1. National Coal vs. CIR 46
Phil. 583
Manila International Airport Authority v. Court
of Appeals, G.R. No. 15560 (July 20, 3006)

Facts: MIAA received Final Notices of Real Estate

17
Tax Delinquency from the City of Parañaque for the
taxable years 1992 to 2001. MIAA’s real estate tax
delinquency was estimated at P624 million. 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 a petition sought to restrain the City of
Parañaque from imposing real estate tax on, levying
against, and auctioning for public sale the Airport
Lands and Buildings.
The City of Parañaque contended that Section 193 of
the Local Government Code expressly withdrew the
tax exemption privileges of “government-owned
and-controlled corporations” upon the effectivity of
the Local Government Code. Thus, MIAA cannot
claim that the Airport Lands and Buildings are
exempt from real estate tax.
MIAA argued that Airport Lands and Buildings are
owned by the Republic. The government cannot tax
itself. The reason for tax exemption of public
property is that its taxation would not inure to any
public advantage, since in such a case the tax debtor
is also the tax creditor.
Issue: Whether or not the City of Parañaque can
impose real tax, levy against and auction for public
sale the Airport Lands and Buildings.
Held: MIAA is Not a Government-Owned or
Controlled Corporation. The Airport Lands and
Buildings of MIAA are property of public dominion
and therefore owned by the State or the Republic of
the Philippines. No one can dispute that properties of
public dominion mentioned in Article 420 of the
Civil Code, like “roads, canals, rivers, torrents, ports
and bridges constructed by the State,” are owned by
the State. The term “ports” includes seaports and
airports. The MIAA Airport Lands and Buildings
constitute a “port” constructed by the State.
Under Article 420 of the Civil Code, the MIAA
Airport Lands and Buildings are properties of public
dominion and thus owned by the State or the
Republic of the Philippines. The Airport Lands and
Buildings are devoted to public use because they are
used by the public for international and domestic
travel and transportation. The fact that the MIAA
collects terminal fees and other charges from the
public does not remove the character of the Airport
Lands and Buildings as properties for public use. The
charging of fees to the public does not determine the
character of the property whether it is of public
dominion or not. Article 420 of the Civil Code
defines property of public dominion as one “intended
for public use.”
The Court has also ruled that property of public
dominion, being outside the commerce of man,
cannot be the subject of an auction sale. Properties of
18
public dominion, being for public use, are not subject
to levy, encumbrance or disposition through public
or private sale. Any encumbrance, levy on execution
or auction sale of any property of public dominion is
void for being contrary to public policy. Essential
public services will stop if properties of public
dominion are subject to encumbrances, foreclosures
and auction sale. This will happen if the City of
Parañaque can foreclose and compel the auction sale
of the 600-hectare runway of the MIAA for non-
payment of real estate tax.
ii. Domestic and Foreign
Corporations
iii. De Jure, De Facto, Corporation by
Estoppel, Corporation by Prescription
1. Barlin vs. Ramirez
Barlin vs. Ramirez
7 Phil. 41
Facts: The defendant Ramirez, having been
appointed by the plaintiff parish priest, took
possession of the church on 7/5/01. He administered
if as such under the orders of his superiors until
11/14/02. His successor having been then appointed,
the latter made a demand on this def. for the delivery
to him of the church, convent, and cemetery, and the
sacred ornaments, books, jewels, money, and other
prop. of the church. The def., by a written document
of that date, refused to make such delivery, stating
that "the town of Lagonoy, in conjunction w/ the
parish priest of thereof, has seen fit to sever
connection w/ the Pope at Rome and his
representatives in these Islands, and to join the
Filipino Church, the head of w/c is at Mla.
In 1/4, the pltff. brought this action against def.,
alleging in his amended complaint that the Roman
Catholic Church was the owner of the church bldg,
the convent, cemetery, the books, money, and other
prop. belonging thereto, and asking that it be restored
to the possession thereof and that the def. render an
account of the prop. w/c he had received and w/c was
retained by him, and for other relief. The CFI-Ambos
Camarines ruled in favor of the pltff.
HELD: It is suggested by the appellant that the
Roman Catholic Church has no legal personality in
the Philippine Islands. This suggestion, made with
reference to an institution w/c antedates by almost a
thousand years any other personality in Europe, and
w/c existed "when Grecian eloquence still flourished
in Antioch, and when idols were still worshipped in
the temple of Mecca," does not require serious
consideration.
 iv. Stock and Non-stock Corporations
v. Holding Company, Affiliate Company,
Parent and Subsidiary Company

19