piercing cases

8/12/2019 Piercing Cases

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GEN CREDIT CORP V. ALSONS DEV AND INVESTMENT CORP 2007

Shortly after its incorporation in 1957 as a finance and investment company, petitioner General Credit Corporation(GCC, for short), then known as Commercial Credit Corporation (CCC), established CCC franchise companies indifferent rban centers of the contry! "n frtherance of its bsiness, GCC had, as early as 197#, applied for and wasable to secre license from the then Central $ank (C$) of the %hilippines and the Secrities and &'chaneCommission (S&C) to enae also in asi*bankin activities! +n the other hand, respondent CCC &ity Corporation(&-"./, for brevity) was orani0ed in ovember 199# by GCC for the prpose of, amon other thins, takin overthe operations and manaement of the varios franchise companies! 2t a time material hereto, respondent 2lsons

3evelopment and "nvestment Corporation (24S+S, hereinafter) and Conrado, icasio, &ditha and 4adislawa, allsrnamed 2lcantara, and 2lfredo de $ora (hereinafter the 2lcantara family, for convenience), each owned, st likeGCC, shares in the aforesaid GCC franchise companies, e.g!, CCC 3avao and CCC Ceb! "n 3ecember 196, 24S+S and the 2lcantara family, for a consideration of .wo 8illion (%,,!)%esos, sold their shareholdins : a total of 11,95; shares, more or less : in the CCC franchise companies to&-"./! +n and over si'ty (B) other marked and sbseently admitted docments, were to the effectthat five (5) incorporators, each contribtin %1,! as the initial paid p capital of the company, orani0ed&-"./ to manae, as it did manae, varios GCC franchises throh manaement contracts! $efore &-"./Fsincorporation, however, GCC was already into the financin bsiness as it was in fact manain and operatin variosCCC franchises! %resented in evidence, too, was the September 9, 196 letter*reply of one G! Hillaneva, then GCC

%resident, to &-"./ %resident @ilfredo 4abayen, bearin on the sale of &-"./ shares to third parties, part of theproceeds of which the 2lcantaras wanted applied to liidate the promissory note in estion! "n said letter, 8r!Hillaneva e'plained that the GCC $oard denied the 2lcantarasF reest to be paid ot of sch proceeds, btnonetheless athori0ed &-"./ to pay them interest ot of &-"./Fs operation income, in preference over what wasde GCC!2lbeit &-"./ presented its president, it opted to adopt the testimony of some of 24S+SF witnesses, inclsive of thedocmentary e'hibits testified to by each of them, as its evidence!Ior its part, GCC called only @ilfredo 4abayen to testify! "t stck to its nderlyin defense of separateness andpresented docmentary evidence detailin the orani0ational strctres of both GCC and &-"./! 2nd in a bid toneate the notion that it was condctin its bsiness illeally, GCC presented C$ and S&C*issed licenses athorinit to enae in financin and asi*bankin activities! "t also addced evidence to prove that it was never a party toany of the actionable docments 24S+S and its predecessors*in*interest had in their possession and that theovember 7, 1965 deed of assinment of rihts over the promissory note was nenforceable!

&ventally, the trial cort, on its findin that &-"./ was bt an instrmentality or adnct of GCC and considerin theleal conseences and implications of sch relationship, came ot with its decision on ovember 6, 199, renderindment for 24S+S, to witA @J&&I+&, the foreoin premises considered, dment is hereby rendered in favor of plaintiff K24S+SLand aainst the defendants K&-"./ and GCCL who are hereby ordered, ointly and severally, to pay plaintiffA


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1! the principal sm of .wo 8illion %esos (%,,!) toether with the interest de thereon at the rate ofeihteen percent (16?) annally compted from


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"$!r!o% !r! s+rr!nd!r!d "o GCC' and no" r!c!i?!d b1 E34IT5 (EK;I)E! that, as disclosed by the 2ditorFs report for 196, past dereceivables alone of GCC e'ceeded %11,,! mostly to GCC affiliates especially CCC &-"./! ED that KC$FsLeport of &'amination dated the foreoin principles and doctrines find sitable applicability in the case at barDand, it havin been satisfactorily and indbitably shown that the said relationships had been sed to perform certainfnctions not characteri0ed with leitimacy, this Cort E feels amply stified to =pierce the veil of corporate entity>and disr!,ard "$! s!)ara"! !is"!nc! o% "$! )!rc!n" (sic# and s+bsidiar1 "$! *a""!r $a?in, b!!n so con"ro**!d

b1 "$! )ar!n" "$a" i"s s!)ara"! id!n"i"1 is $ard*1 disc!rnib*! "$+s b!co&in, a &!r! ins"r+&!n"a*i"1 or a*"!r !,oo% "$! %or&!r! Conseently, as the parent corporation, KpetitionerL GCC maybe (sic) held responsible for the actsand contracts of its sbsidiary : KrespondentL &-"./ * most especially if the latter (who had anyhow acknowlededits liability to 24S+S) maybe (sic) withot sfficient property with which to settle its obliations! Ior, after all, GCCwas the entity which initiated and benefited immensely from the fradlent scheme perpetrated in violation of the law!(@ords in parenthesis in the oriinalD emphasis and bracketed words added)! Given the foreoin considerations, it behooves the petitioner, as a matter of law and eity, to assme theleitimate financial obliation of a cash*strapped sbsidiary corporation which it virtally controlled to sch a dereethat the latter became its instrment or aent! .he facts, as fond by the corts a quo, and the applicable law call forthis kind of disposition! +r else, the Cort wold be allowin the wron se of the fiction of corporate veil!

W;ERE8ORE, the instant petition is DENIEDand the appealed 3ecision and esoltion of the Cort of2ppeals are accordinly A88IRMED! Costs aainst the petitioner!

SO ORDERED.

CONCEPT


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)ear or 011 wor5ing da)s. *n 78 No+em$er 9, t#e N(RC dismissed t#e motion /or reconsideration /iled $) CB ont#e ground t#at t#e said decision #ad alread) $ecome /inal and e2ecutor).

*n *cto$er , t#e N(RC Researc# and n/ormation Department made t#e /inding t#at %ara$e, et. al.4s $ac5wages amounted to ;,11.11. *n 7 *cto$er , t#e (a$or Ar$iter issued a writ o/ e2ecution directing t#es#eri// to e2ecute t#e Decision, dated Decem$er 6. '#e writ was partiall) satis/ied t#roug# garnis#ment o/sums /rom CB4s de$tor, t#e %etropolitan Waterwor5s and Sewerage Aut#orit), in t#e amount o/ ;,09.06. Saidamount was turned o+er to t#e cas#ier o/ t#e N(RC. *n alenuela, %etro %anila.

el% t is a un%amental $rinci$le o cor$oration law that a cor$oration is an entit se$arate an% %istinct romits stochol%ers an% rom other cor$orations to which it ma "e connecte%. ut, this se$arate an% %istinct$ersonalit o a cor$oration is merel a iction create% " law or con!enience an% to $romote ustice . So,w#en t#e notion o/ separate 3uridical personalit) is use% to %eeat $u"lic con!enience, usti wrong, $rotect rau%or %een% crime, or is used as a de+ice to de/eat t#e la$or laws, t#is se$arate $ersonalit o the cor$oration ma"e %isregar%e% or t#e +eil o/ corporate /iction pierced. '#is is true li5ewise w#en t#e corporation is merel) an ad3unct,a "usiness con%uit or an alter ego o another cor$oration.'#e conditions under w#ic# t#e 3uridical entit) ma) $edisregarded +ar) according to t#e peculiar /acts and circumstances o/ eac# case. No #ard and /ast rule can $eaccuratel) laid down, $ut certainl), t#ere are some pro$ati+e /actors o/ identit) t#at will 3usti/) t#e application o/ t#edoctrine o/ piercing t#e corporate +eil, to wit: !" Stoc5 owners#ip $) one or common owners#ip o/ $ot# corporations&!7" dentit) o/ directors and o//icers& !0" '#e manner o/ 5eeping corporate $oo5s and records& and !6" %et#ods o/conducting t#e $usiness. '#e SEC en $anc e2plained t#e ?instrumentalit) rule? w#ic# t#e courts #a+e applied in

disregarding t#e separate 3uridical personalit) o/ corporations as ?W#ere one corporation is so organied andcontrolled and its a//airs are conducted so t#at it is, in /act, a mere instrumentalit) or ad3unct o/ t#e ot#er, t#e /iction o/t#e corporate entit) o/ t#e ?instrumentalit)? ma) $e disregarded. '#e control necessar) to in+o5e t#e rule is notma3orit) or e+en complete stoc5 control $ut suc# domination o/ instances, policies and practices t#at t#e controlledcorporation #as, so to s$ea, no se$arate min%, will or e6istence o its own, an% is "ut a con%uit or its$rinci$al. t must $e 5ept in mind t#at t#e control must $e s#own to #a+e $een e2ercised at t#e time t#e actscomplained o/ too5 place. %oreo+er, t#e control and $reac# o/ dut) must pro2imatel) cause t#e in3ur) or un3ust loss/or w#ic# t#e complaint is made.? '#e test in determining t#e applica$ilit) o/ t#e doctrine o/ piercing t#e +eil o/corporate /iction is as !1; Control, not mere maorit or com$lete stoc control, "ut com$lete %omination, notonl) o/ /inances $ut o/ polic) and $usiness practice in respect to t#e transaction attac5ed so t#at t#e corporate entit)as to t#is transaction #ad at t#e time no separate mind, will or e2istence o/ its own& !?; @uch control must ha!e "eenuse% " the %een%ant to commit rau% or wrong, to perpetuate t#e +iolation o/ a statutor) or ot#er positi+e legaldut) or dis#onest and un3ust act in contra+ention o/ plainti//4s legal rig#ts& and :3; *he aoresai% control an% "reach

o %ut must $ro6imatel cause the inur or unust loss com$laine% o. '#e a$sence o/ an) one o/ t#eseelements pre+ents ?piercing t#e corporate +eil.? n appl)ing t#e ?instrumentalit)? or ?alter ego? doctrine, t#e courts areconcerne% with realit an% not orm, wit# #ow t#e corporation operated and t#e indi+idual de/endant4s relations#ipto t#at operation. '#us t#e question o/ w#et#er a corporation is a mere alter ego, a mere s#eet or paper corporation, as#am or a su$ter/uge is purel) one o/ /act. @ere, w#ile CB claimed t#at it ceased its $usiness operations on 7 April


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, it /iled an n/ormation S#eet wit# t#e Securities and E2c#ange Commission on 9 %a) 8, stating t#at itso//ice address is at 099 %a)san Road, >alenuela, %etro %anila. *n t#e ot#er #and, @;;, t#e t#ird-part) claimant,su$mitted on t#e same da), a similar in/ormation s#eet stating t#at its o//ice address is at 099 %a)san Road,>alenuela, %etro %anila. irgilio *. CasiFo as t#e corporatesecretar) o/ $ot# corporations. Bot# corporations #ad t#e same president, t#e same $oard o/ directors, t#e samecorporate o//icers, and su$stantiall) t#e same su$scri$ers.

the certificate of sale issed allein that the promissory notes, trst receipts and e'port bills were all ltra vires ac"so% T!r!si"a as "$!1 !r! !!c+"!d i"$o+" "$! r!:+isi"! board r!so*+"ionof the $oard of 3irectors of $&C!

"SS-&A @hether or not the doctrine of piercin the veil of corporate fiction is applicable in this caseD

-4"GA

espondents conter that there is clear and convincin evidence to show frad on part of petitioners iven thefindins of the trial cort, as affirmed by the Co+r" o% A))!a*s' "$a" or thealter eo doctrine, which the corts have applied in disreardin the separate ridical personality of corporations! 2sheld in one case,

@here one corporation is so orani0ed and controlled and its affairs are condcted so "$a" i" is' in %ac"' a &!r!ins"r+&!n"a*i"1 or adB+nc" o% "$! o"$!r' "$! %ic"ion o% "$! cor)ora"! !n"i"1 o% "$! ins"r+&!n"a*i"1@ &a1 b!disr!,ard!d. T$! con"ro* n!c!ssar1 "o in?o! "$! r+*! is no" &aBori"1 or !?!n co&)*!"! s"oc con"ro* b+" s+c$do&ina"ion o% %inanc!s' )o*ici!s and )rac"ic!s "$a" "$! con"ro**!d cor)ora"ion $as' so "o s)!a' no s!)ara"!&ind' i** or !is"!nc! o% i"s on' and is b+" a cond+i" %or i"s )rinci)a*. '''K1;L

$&. and $&C are not separate bsiness entities at &stelita 4ipat e'ected a special power of attorney in favor of her

dahter, .eresita, to obtain loans and credit lines from %acific $ank on her behalf!K1BL "ncidentally, .eresita wasdesinated as e'ective*vice president and eneral manaer of both $&. and $&C, respectively!K17L @e note frtherthatA (1) &stelita and 2lfredo 4ipat are the owners and maority shareholders of $&. and $&C, respectivelyDK16L ()both firms were manaed by their dahter, .eresitaDK19L (;) both firms were enaed in the arment bsiness,spplyin prodcts to =8ystical Iashion,> a -!S! firm established by &stelita 4ipatD (#) both firms held office in the


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same bildin owned by the 4ipatsDKL (5) $&C is a family corporation with the 4ipats as its maority stockholdersD (B)the bsiness operations of the $&C were so mered with those of 8rs! 4ipat sch that they were practicallyindistinishableD (7) the corporate fnds were held by &stelita 4ipat and the corporation itself had no visible assetsD(6) the board of directors of $&C was composed of the $ros and 4ipat family membersDK1L (9) &stelita had fllcontrol over the activities of and decided bsiness matters of the corporationDKL and that (1) &stelita 4ipat hadbenefited from the loans secred from %acific $ank to finance her bsiness abroadK;L and from the e'port billssecred by $&C for the accont of =8ystical Iashion!>K#L "t cold not have been coincidental that $&. and $&C areso intertwined with each other in terms of ownership, bsiness prpose, and manaement! 2pparently, $&. and $&Care one and the same and the latter is a condit of and merely scceeded the former! P!"i"ion!rs@ a""!&)" "o iso*a"!

"$!&s!*?!s %ro& and $id! b!$ind "$! cor)ora"! )!rsona*i"1 o% ' 9' 4MACOR !&)*o1!d "$! *a"! Paci%ica L. Ga"+s as P+rc$asin, A,!n". +n 8ay 1B, 19B5,%acifico 4! Gats was detailed with petitioner company! Je reported back to -82C+ on 2st 1, 19B5! +n


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)@@(& W#et#er or not t#e 3udgment o/ t#e Court o/ ndustrial Relations is correct.

&2> Les. '#is is an instance w#ere t#e corporation and its mem$ers can $e considered as one. &C&) is a closeamil cor$oration the incor$orators are mem"ers o the Cano amil.


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"t trned ot that in o)!ra"in, i"s )arin, b+sin!ss' "$! cor)ora"ion occ+)i!d and +s!d no" on*1 "$! Sa&ani**o*o" i" $ad *!as!d b+" a*so an adBac!n" *o" b!*on,in, "o "$! r!s)ond!n"sa))!**!!s Padi**a' withot the ownersNknowlede and consent! @hen the latter discovered the trth arond +ctober of 19#7, t $!1 d!&and!d )a1&!n" forthe se and occpation of the lot!.he corporation (then controlled by petitioners Ciri*o Parad!s and 4rs+*a To*!n"ino' $o $ad )+rc$as!d and $!*d'9 o% i"s '=00 s$ar!s# disc*ai&!d *iabi*i"1' b*a&in, "$! ori,ina* incor)ora"ors' McConn!*' Rodri,+! andCoc$ran!. W$!r!+)on' "$! *o" on!rs %i*!d a,ains" i" a co&)*ain" %or %orcib*! !n"r1 in "$! M+nici)al Cort of8anila on 7 +ctober 19#7 (Civil Case o! #;1)!

ownership of all or nearly all of the capital stock of a corporation is a mere bsiness condit of the stockholder, thatconclsion is amply stified where it is shown, as in the case before s, that the operations of the corporation were somered with those of the stockholders as to be practically indistinishable from them! .o hold the latter liable for thecorporationNs obliations is not to inore the corporationNs separate entity, bt merely to apply the established principlethat sch entity can not be invoked or sed for prposes that cold not have been intended by the law that created


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that separate personality!.he petitioners*appellants insist that the Cort cold have no risdiction over an action to enforce a dment withinfive (5) years from its rendition, since the les of Cort provide for enforcement by mere motion drin those fiveyears! .he error of this stand is apparent, becase the second action, oriinally ben in the Cort of Iirst "nstance,was not an action to enforce the dment of the 8nicipal Cort, bt an action to have non*parties to the dmentheld responsible for its payment!Iindin no error in the dment appealed from, the same is hereby affirmed, with costs aainst petitioners*appellantsCirilo %aredes and -rsla .olentino!

;ALLE5 V. PRINTWELL 20

Cas! Di,!s"

IactsA+ $8%" ($siness 8edia %hilippines "nc!) is a corporation nder the control of itsstockholders, incldin 3onnina Jalley!+ "n the corse of its bsiness, 7'=00.Jalley contends thatA1!

.hey all had already paid their sbscriptions in fll!$8%" had a separate and distinct personality;!$+3 and SJ had resolved to dissolve $8%".C and C2+ 3efendant merely sed the corporate fiction as a cloakPcover to create an instice (aainst %".@&44)

+ eected alleations of fll payment in view of irrelarity in the issance of +s (%ayment made on a later date was covered by an +with a lower serialnmber than payment made on an earlier date!

"sseA @+ a stockholder who was in active manaement of the bsiness of the corporation and still has npaid sbscriptions shold bemade liable for the debts of the corporation by piercin the veil of corporate fiction

JeldA /&SR Sch stockholder shold be &ad! *iab*! +) "o "$! !"!n" o% $!r +n)aid s+bscri)"ion

atioA"t was fond that at the time the obliation was incrred, $8%" was nder the control of its s"oc$o*d!rs $o no %+**1 !** "$a" "$!cor)ora"ion as no" ina )osi"ion "o )a1 i"s acco+n"(thinly capitali0ed)!2nd, that the stockholders personally benefited from the operations of the corporation even thoh they never paid their sbscriptions in fll!.he stockholders cannot now claim the doctrine of corporate fiction otherwise (to deny creditors to collect from SJ) it wold create an insticebecase creditors wold be at aloss (limbo) aainst whom it wold assert the riht to collect!

+n piercin the veilA2lthoh the corporation has a personality separate and distinct from its SJ, sch personality is merely a leal fiction (for the convenience andto promote the ends of stice) which may be disrearded by the corts if it is sed as a cloak or cover for frad, stification of a wron, or ana*"!r !,o %or "$! so*! b!n!%i" o% "$! S;.


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npaid sbscriptions to $8%" yet reatly benefited from said transactions! "n view of the npaid sbscriptions, $8%"failed to pay appellee of its liability, hence appellee in order to protect its riht can collect from the appellantsstockholders reardin their npaid sbscriptions! .o deny appellee from recoverin from appellants wold placeappellee in a limbo on where to assert their riht to collect from $8%" since the stockholders who are appellantsherein are availin the defense of corporate fiction to evade payment of its obliations!"t follows, therefore, that whether or not the petitioner persaded $8%" to renee on its obliations to pay, and whetheror not she indced %rintwell to transact with $8%" were not ooddefensesin the sit!

IV

Liabi*i"1 o% s"oc$o*d!rs %or cor)ora"! d!b"s is +)"o "$! !"!n"o% "$!ir +n)aid s+bscri)"ion.he .C declared the stockholderspro rataliable for the debt(based on the proportion to their shares in the capitalstock of $8%")D and held the petitionerpersonally liable onlyin the amont of %1#9,955!B5!@e do not aree! .he .C lacked the leal and factal spport for its proratin the liability! Jence, we need to modifythe e'tent of the petitionerFs personal liability to %rintwell! .he prevailin rle is that a stockholder is personally liablefor the financial obliations of the corporation to t#e e2tent o/ #is unpaid su$scription!"n view ofthe petitionerFs npaidsbscription bein worth %B,5!, shewas liable p to that amont!"nterest is also imposable on the npaid obliation! 2bsent any stiplation, interest is fi'ed at 1? per annumfrom thedate the amended complaint was filed on Iebrary 6, 199 ntil the obliation ( i.e!, to the e'tent of the petitionerFspersonal liability of %B,5!) is flly paid!4astly, we find no basis torant attorneyFs fees, the award for which mst be spported by findins of fact and of lawas provided nder 2rticle 6 of the Ci+il Codeincorporated in the body of decision of the trial cort! .he absence of

the reisite findins from the .C decision warrants the deletion of the attorneyFs fees!ACCORDINGL5, we deny the petition for review on certiorariDand affirm with modification the decision promlated on2st 1#, by orderin the petitionerto pay to %rintwell, "nc! the sm of %B,5!, pls interest of 1?perannumto be compted from Iebrary 6, 199 ntil fll payment!.he petitioner shall paycost of sit in this appeal!SO ORDERED!

54TIVO SONS ;ARDWARE V. CTA

Cas! Di,!s"

isa)as and %indanao $) t#e GS manu/acturer o/ cars and truc5s sold $) P%.+uti!o $ai% the sales ta6prescri$ed on t#e $asis o/ selling price to S%. @4 $ai% no sales ta6 on its sales to the

$u"lic.

An assessment was made upon +uti!o or %eicienc sales ta6. '#e Collector o/ nternal Re+enue, contends t#att#e ta6a"le sales were the retail sales " @4 to the $u"lic an% not the sales at wholesale ma%e " +uti!o to t#e latter inasmuc# as @4 an% +uti!o were one an% the same cor$oration, t#e /ormer $eing a su$sidiar) o/ t#elatter.

'#e assessment was disputed $) petitioner. A/ter rein+estigation, a second assessment was made, sustaining t#e+alidit) o/ t#e /irst assessment. Luti+o contested t#e second assessment, alleging t#at t#ere is no +alid ground todisregard t#e corporate personalit) o/ S% and to #old t#at it is an ad3unct o/ petitioner.

ssue: W#et#er or not t#e cor$orate $ersonalit o @4 coul% "e %isregar%e%.

@eld: +es. A corporation is an entit) separate and distinct /rom its stoc5#olders and /rom ot#er corporations to w#ic# itma) $e connected. @owe+er, w#en t#e notion o/ legal entit) is used to de/eat pu$lic con+enience, 3usti/) wrong,protect /raud, or de/end crime, t#e law will regard t#e corporation as an association o/ persons, or, in t#e case o/ twocorporations, merge t#em into one. W#en t#e corporation is a mere alter ego or $usiness conduit o/ a person, it ma)$e disregarded.


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SC ruled t#at C'A was not 3usti/ied in /inding t#at S% was organied to de/raud t#e Po+ernment. S% was organied in=une 6, /rom t#at date until =une 01, 68, P% was t#e importer o/ t#e cars and truc5s sold to Luti+o, w#ic# in turnwas sold to S%. P%, as importer was t#e one solel) lia$le /or sales ta2es. Neit#er Luti+o nor S% was su$3ect to t#esales ta2es. Luti+os lia$ilit) arose onl) until =ul) , 68 w#en it $ecame t#e importer. @ence, t#ere was no ta2 toe+ade.

@owe+er, SC agreed wit# t#e respondent court t#at S% was actuall) owned and controlled $) petitioner.Consideration o/ +arious circumstances indicate t#at +uti!o treate% @4 merel as its %e$artment or a%unct

a. '#e /ounders o/ t#e corporation are closel) related to eac# ot#er $) $lood and a//init).

$. '#e o$3ect and purpose o/ t#e $usiness is t#e same& $ot# are engaged in sale o/ +e#icles, spare parts, #ardwaresupplies and equipment.

c. '#e accounting s)stem maintained $) Luti+o s#ows t#at it maintained #ig# degree o/ control o+er S% accounts.

d. Se+eral correspondences #a+e re/erence to Luti+o as t#e #ead o//ice o/ S%. S% ma) e+en /reel) use /orms orstationer) o/ Luti+o.

e. All cas# collections o/ S%s $ranc#es are remitted directl) to Luti+o.

/. '#e controlling ma3orit) o/ t#e Board o/ Directors o/ Luti+o is also t#e controlling ma3orit) o/ S%.

g. '#e principal o//icers o/ $ot# corporations are identical. Bot# corporations #a+e a common comptroller in t#e persono/ Simeon S), w#o is a $rot#er-in-law o/ Luti+os president, Lu O#e '#ai.

#. Luti+o, /inanced principall) t#e $usiness o/ S% and actuall) e2tended all t#e credit to t#e latter not onl) in t#e /ormo/ starting capital $ut also in t#e /orm o/ credits e2tended /or t#e cars and +e#icles allegedl) sold $) Luti+o to S%.

8RANCISCO V. MEIA 200

Cas! Di,!s"

A%alia rancisco was the *reasurer o Car%ale ee% rescin%e%. W#ile t#e case was pending, Putierre died, and Rita 4eia, "eing thee6ecutri6 o/ t#e will o/ Putierre too5 o+er t#e a//airs o/ t#e estate.'#e case dragged on /or 6 )ears $ecause


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merel) $oug#t t#e properties /rom t#e auction sale and suc# per se is not a wrong/ul act or a /raudulent act. 'ime andagain it #as $een reiterated t#at mere owners#ip $) a single stoc5#older or $) anot#er corporation o/ all or nearl) allo/ t#e capital stoc5 o/ a corporation is not o/ itsel/ su//icient ground /or disregarding t#e separate corporate personalit).@ence, %err)land cant $e #eld solidaril) lia$le wit#


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nathori0ed act of its officer or aents ac:+i!sc!s in and cons!n"s "o s+c$ ac"s' i" "$!r!b1 ra"i%i!s "$!&'especially where the aciescence reslts in predice to a third person!' ' ' ' ' ' ' ' 'SEC. .So, when, in the sal corse of bsiness of a corporation, an officer has been allowed in his officialcapacity to manae its affair, his athority to represent the corporation may be inferred from the manner in which hehas been permitted by the directors to transact its bsiness!

S&C! B5B! "n accordance with a well*known rle of the *a o% a,!nc1'notice to corporate officers or aents within thescope or apparent scope of their athority is attribted to the corporation!

SEC. 7! 2s a eneral rle, if a cor)ora"ion i"$ no*!d,! o% i"s a,!n"s +na+"$ori!d ac" r!c!i?!d and !nBo1s"$! b!n!%i"s "$!r!o%' i" i&)*i!d*1 ra"i%i!s "$!nathori0ed act if it is one capable of ratification by parol!

"n its article on corporations, Corps


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Araullo, C. =., Street, %alcolm, A+anceFa, *strand, and Romualde, ==., concur.

S;OEMART V. NLRC

.he 4abor 2rbiter dismissed the complaint for lack of merit, citin the principle of manaerial control, which

reconi0es the employerUs preroative to prescribe reasonable rles and relations to overn the condct ofhis employees! Je relied on S$o!&ar"' Inc. ?s. NLRCA V!!!that individal co&)*ainan" $as ind!!dabandon!d $is or!!! therefore, nder the law and risprdence which pholds the riht of an employer todischare an employee who inc+rs %r!:+!n"' )ro*on,!d and +n!)*ain!d abs!nc!s as b!in, ,ross*1

r!&iss in $is d+"i!s "o "$! !&)*o1!r and is "$!r!%or!' dis&iss!d %or ca+s!. 2n employee is deemed tohave abandoned his position or to have resined from the same, whenever he has been absent there fromi"$o+" )r!?io+s )!r&ission o% "$! !&)*o1!r %or "$r!! cons!c+"i?! da1s or &or! ! V

.he 4C modified the 4abor 2rbiterNs decision and held that complainantUs dismissal was invalid for the

followin reasonsA Complainant* appellantUs proloned absences, althoh nathori0ed, may not amont toross nelect or abandonment of work to warrant otriht termination of employment! 3ismissal is too severea penalty!!!eliance on the rlin ennciated in the cited case of Shoemart is ite misplaced becase of theobvios dissimilaritiesWcomplainant in the S$o!&ar" Cas! as an in?!"!ra"! abs!n"!! $o do!s no"d!s!r?! r!ins"a"!&!n" co&)ar!d "o $!r!in co&)*ainan" a))!**an" $o is a %irs" o%%!nd!r

.wo main estions are raised in these consolidated petitions! .he first is whether the 4abor 2rbiterNs refsal to allowone party to resme and complete cross*e'amination of a vital witness W and another party, even to commencecross*e'amination of the same witness W constittes a denial of de process! .he second is whether a corporationmay be held liable for acts of nfair labor practice and illeal dismissal of employees of a Osister corporation,O enaedin a different line of bsiness, on the theory that the latter is the formerNs alter ego or bsiness condit!+ne of the corporations involved is 8oris "ndstries, "nc! (8+"S, for short), a private corporation enaed in themanfactre of leather prodcts, e!!, bas, belts, etc! "t had in its employ seventy*three (7;) workers, fifty*si' (5B) ofwhom are members of a labor orani0ation known as 8oris "ndstries @orkers -nion (-"+, for short)!+n


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by the ational 4abor elations Commission which overn Othe hearin and disposition of cases before it and itsreional branches ! ! ! !O .he Oevised le of Cort of the %hilippines and prevailin risprdence,O the law says,may be applied to labor cases only nder ite strinent limits, i!e!, Oin the absence of any applicable provision (in theles of the Commission), and in order to effectate the obectives of the 4abor Code ! ! !, in the interest ofe'peditios labor stice and whenever practicable and convenient, by analoy or in a sppletory character andeffect!O -nder these rles, the proceedins before a 4abor 2rbiter are Onon*litiios in natreO in which, Osbect tothe reirements of de process, the technicalities of law and procedre and the rles obtainin in the corts oflaw ! ! ! (do not) strictly applyDO 2Otrial*typeO hearins are not reiredD cases may be decided on the basis of verifiedposition papers sbmitted by the parties, accompanied by the affidavits of their witnesses and sch other athentic

docments as are relevant!

Sch a procedre has been sanctioned by this Cort as not violative of de process!9

ow, whether or not a Oformal trial or hearinO shold be had is a matter lyin in the discretion of the 4abor 2rbiter! =.he 2rbiter may opt to hold a hearin, e!!, where the affidavits Obein actally hearsay and ntested by cross*e'amination, are not enoh to satisfy the antm of proof reired by law, especially where the statements of theaffiants are controverted ! ! ! ! O

"n this case, the first 4abor 2rbiter who took coni0ance of the cases (2rbiter omlo 4ope0) evidently believed ahearin with cross*e'amination of witnesses wold be of help in the determination of the merits of the cases! Jis viewwas not shared by the 4abor 2rbiter to whom the cases were ltimately assined (2rtbiter Cornelio 4insanan) whoopined that after a thorohoin review of the records, Othe case be decide already based on the several pleadinfiled ! ! ! !O .he 2rbiter nevertheless ave the parties fifteen K15L days Owithin which to file their last pleadins,O i!e!,sbmit additional evidence and arments, after which Othe case shall be considered sbmitted already for resoltion!O8+"S and SJ+&82. were ths iven ample opportnity to be heard, to addce evidence of their version of thematerial factal occrences and controvert the -"+Ns proofs, incldin the affidavit of Crescencio &dic! .hey both

sbmitted position papers with spportin affidavits and docmentsD they presented arments in spport of theirsbmissions throh varios pleadins and motions! $oth 8+"S and SJ+&82. additionally pleaded their caseson appeal before the ational 4abor elations Commission!-nder the circmstances, a claim of denial of de process on SJ+&82.Ns part is completely navailin! .heessence of de process is that a party be afforded a reasonable opportnity to be heard and to sbmit any evidencehe may have in spport of his defense! 7@hat is vital, in other words, is not the opportnity to cross*e'amine aparticlar witness, bt the opportnity to be heard of which, as already stated, SJ+&82. has e'tensively availed!S;OEMART n!" i&)+,ns "$! )+b*ic r!s)ond!n"sQ ac" o% )i!rcin, "$! ?!i* o% cor)ora"! %ic"ion as r!,ardMORIS s!)ara"!*1 r!,is"!r!d as a B+ridica* !n"i"1 and )rono+ncin, i" "o b! a &!r! cond+i" o%S;OEMART' and !:+a**1 *iab*! +)on "$! %or&!rQs *iabi*i"i!s "o i"s !&)*o1!!s. >.he respondent CommissionNsconclsions on this point were drawn from the followin facts, which it deemed to have been adeately establishedby the complainant -"+Ns evidence, to witA

1! "n his affidavit, 8r! (Cresencio) &dic testified that he was first employed as sample maker, by the people who

owned S8! Jis ob was to make samples to be displayed on the window and only those which appealed to thecstomers were mass prodced! @hen he was promoted to over*all spervisor, the factory was transferred to itspresent location and from then on, this prodction division was incorporated separately and has nderone manychanes in name, yet all throhot, the known owners of the factory remain the sameD! 2n e'amination of the "ncorporation papers of S8 Shoe 8art and 8oris 8anfactrin show (sic) that e'cept for&li0abeth Sy W all other five (5) incorporators and directors of 8orris "ndstries are maor stockholders of S8 Shoe8art as of


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orientation, etc! between its employees and those of 8+"S!No r!asonab*! a*"!rna"i?! "$+s )r!s!n" i"s!*% !c!)" "o r!:+ir!d "$! )a1&!n" o% s!)ara"ion )a1 in *i!+ o% "$!r!ins"a"!&!n" d!cr!!d b1 "$! B+d,&!n" o% "$! r!s)ond!n" Commission! .hat liability may in the premises properlyand stly be imposed on SJ+&82., as well as on 8+"S and on the latterNs president or e'ective head, 20ointlyand severally!@J&&I+&, the petitions for certiorari are 3&"&3! .he 3ecision of the respondent Commission of


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(a) %1,75,! as of 2pril ;, 199, pls monthly rental of %, per month startin in 8ay, 199, ntil plaintiffshall trn over possession of the premises to the defendant, with interest at 1? per month ntil flly paidD(b) 8oral damaes in the amont of %1,!D(c) &'emplary damaes in the amont of %1,!D and(d) 2ttorneyFs fees in the amont of %15,!D and(e) .he cost of sit!>%2 appealed the .C decision to the Cort of 2ppeals! +n +ctober , 199, the C2 affirmed the .C decision,decreein as followsA=@J&&I+&, with 8+3"I"C2."+S that the award of %1,! for moral damaes and %1,! for

e'emplary damaes is 3&4&.&3 from the dment appealed from, the rest thereof not inconsistent herewith is2II"8&3! o costs!>%2Fs motion for reconsideration was denied by the C2 in a resoltion dated 8arch 15, 199;! %2 then filed beforethis Cort a petition for review on certiorari, which we denied in a resoltion dated September 7, 199;! @e likewisedenied %2Fs motion for reconsideration in a resoltion dated 2llein that the writ of e'ection cannot be enforced aainst them, herein petitioners filed with the .C on 3ecember

15, 199#, an omnibs motion for the reconsideration of the order of ovember 9, 199#, and for annlment of thealias writ of the same date and cancellation of the notice of levy and sale dated 3ecember 1B, 199#! %etitionersassailed these orders as confiscatory, since they were never parties to the case filed by %2 aainst S", and theywere nable to present evidence on their behalf! .he motion was denied on Iebrary 1, 1995!Sbseently, on 8arch 6, 1995, petitioners filed with the Cort of 2ppeals a petition for certiorariand prohibitionnder le B5 of the les of Cort! .his petition was also deniedD so was petitionersF motion for reconsideration ofsaid denial!.he Cort of 2ppeals areed with the .CFs findin that there is evidence on record to spport the .CFs conclsionthat %2 and %hoeni'*+mea are one and the same, or that the former is a mere condit of the latter! "t pointed otthat petitioner %adilla is both president and eneral manaer of %2 and at the same time chairman of the board ofdirectors and controllin stockholder of %hoeni'*+mea! %2 and %hoeni'*+mea also shared officers, laborers, andoffices!@hile aware that the dispositive portion of the .C decision holds only %2 liable to S", the Cort of 2ppeals pointed

ot that the intent of the .C was clearly to hold %2, %hoeni'*+mea, and %adilla liable, as shown in the body of the.C decision! .he rle that the dispositive portion of a decision is the sbect of e'ection only applies where thedisposition is clear and neivocal, accordin to the C2, nlike in this case where there is ncertainty and ambiity!.he body of the decision may be conslted to constre the dment in this case!+n the claim that %hoeni'*+mea and %adilla were not parties to the case, the C2 rled that


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=a person not so impleaded to an action is deemed to be a party to a sit when he has the riht to control theproceedins, to make defense, to addce and cross e'amine witnesses, and to appeal from a decision (B7 C!

.o or mind, the main isse for or consideration is whether or not the trial cort had risdiction over petitioners, tostify the issance of an alias writ of e'ection aainst their properties!2 cort acires risdiction over a person throh either a valid service of smmons or the personFs volntaryappearance in cort! 2 cort mst necessarily have risdiction over a party for the latter to be bond by a cortdecision!=Generally accepted is the principle that no man shall be affected by any proceedin to which he is a straner, andstraners to a case are not bond by dment rendered by the cort! '''>"n the present case, we note that the trial cort never acired risdiction over petitioners throh any of the modesmentioned above! either of the petitioners was even impleaded as a party to the case!@ithot the trial cort havin acired risdiction over petitioners, the latter cold not be bond by the decision of thecort! &'ection can only be issed aainst a party and not aainst one who was not accorded his day in cort! .olevy pon their properties to satisfy a dment in a case in which they were not even parties is not only inappropriateDit most certainly is deprivation of property withot de process of law! .his we cannot allow!

.he corts a quorled that petitioner %adilla, in particlar, had his day in cort! 2s eneral manaer of %2, heactively participated in the case in the trial cort! Je =ha(d) the riht to control the proceedins, to make defense, toaddce and cross e'amine witnesses, and to appeal from a decision!> .herefore, %adilla and %hoeni'*+mea, ofwhich %adilla is chairman of the board, cold not now are that they did not have the opportnity to present theircase in cort, accordin to private respondent!


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.o bein with, it is clear that %adilla participated in the proceedins below as eneral manaer of %2 and not in anyother capacity! .he fact that at the same time he was the chairman of the board of %hoeni'*+mea cannot, by anystretch of reasonin, eate to participation by %hoeni'*+mea in the same proceedins! @e aain stress that%hoeni'*+mea was not a party to the case and so cold not have taken part therein!%rivate respondent, however, insists that the trial cort had pierced the veil of corporate fiction protectin petitioners,and this stifies e'ection aainst their properties!.he eneral rle is that a corporation is clothed with a personality separate and distinct from the persons composin it!"t may not be held liable for the obliations of the persons composin it, and neither can its stockholders be held liablefor its obliations!

.his veil of corporate fiction may only be disrearded in cases where the corporate vehicle is bein sed to defeatpblic convenience, stify wron, protect frad, or defend crime! %2 and %hoeni'*+mea are admittedly sistercompanies, and may be sharin personnel and resorces, bt we find in the present case no alleation, mch lesspositive proof, that their separate corporate personalities are bein sed to defeat pblic convenience, stify wron,protect frad, or defend crime! =Ior the separate ridical personality of a corporation to be disrearded, thewrondoin mst be clearly and convincinly established! "t cannot be presmed!> @e find no reason to stifypiercin the corporate veil in this instance!@e nderstand private respondentFs frstration at not bein able to have the monetary award in their favor satisfied!$t iven the circmstances of this case, pblic respondent cannot order the sei0re of petitionersF properties withotviolatin their constittionally enshrined riht to de process, merely to compensate private respondent!W;ERE8ORE, the instant petition is G2.&3! .he assailed decision and resoltion of the Cort of 2ppeals in C2*G!! S% o! ;BB65 are S&. 2S"3&, and the order of the trial cort dated ovember 9, 199# and the alias writ ofe'ection issed on the same date in connection with Civil Case o! 7;, are declared -44 and H+"3!

Costs aainst private respondent!S+ +3&&3!

ACINTO V. CA

.his is an appeal by certiorarito partially set aside the 3ecision of the Cort of 2ppeals in C!2*G!! CH o! 615;.promlated on 19 2st 1967, which affirmed in totothe decision of the eional .rial Cort of 8anila, $ranch 11,in Civil Case o! 1;;1B# entitled O8etropolitan $ank and .rst Co! vs! "nland "ndstries "nc! and oberto


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"ndstries, "nc! and the latter (defendant corporation) has a ridical personality distinct and separate from its officersand stockholders! "t is likewise asserted, citingan 2merican case, that the principle of piercin the fiction of corporateentity shold be applied with reat cation and not precipitately, becase a dal personality by a corporation and itsstockholders wold defeat the principal prpose for which a corporation is formed! -pon the other hand, plaintiff*appellee reiterated its alleation in the complaint that defendant corporation is st a mere alter eo of defendantoberto


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n t#e case $e/ore us it can not $e denied t#at t#e plainti// was not )et incorporated w#en it entered into a contract o/sale, E2#i$it A. Not $eing in legal e2istence t#en, it did not possess 3uridical capacit) to enter into t#e contract.

Boiled down to its na5ed realit), t#e contract #ere !E2#i$it A" was entered into not $etween %anuel 'a$ora and a non-e2istent corporation $ut $etween t#e %anuel 'a$ora as owner o/ t#e /our parcels o/ lands on t#e one #and and t#esame %anuel 'a$ora, #is wi/e and ot#ers, as mere promoters o/ a corporations on t#e ot#er #and.


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8eanwhile, inspections had been made of petitionerNs electric plant and installations by the enineers of theCommission, as followsA 2pril 15, 1956 by &nineer 2ntonio 8! 2lliD September 16, 1959,


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"n estionin the decision in Case o! B*51#;, petitioner contendsA (1) that the Commission erred in denyinpetitionerNs motion to dismiss and proceedin with the hearin of the application of the 8oron &lectricD () that theCommission erred in rantin 8oron &lectric a certificate of pblic convenience and necessity since it is notfinancially capable to render the serviceD (;) that the Commission erred when it made findins of facts that are notspported by the evidence addced by the parties at the trialD and (#) that the Commission erred when it did not iveto petitioner protection to its investment W a reiteration of the third assinment of error in the other case!1awphYl!nZt

@e shall now discss the appeals in these two cases separately!

G!! o! 4*99;

1! -nder the first assinment of error, petitioner contends that while 8r! %edro S! .alavera, who condcted thehearins of the case below, is a division chief, he is not a lawyer! 2s sch, nder Section ; of Commonwealth 2ct o!1#B, as amended, the Commission shold not have deleated to him the athority to condct the hearins for thereception of evidence of the parties!

@e find that, really, 8r! .alavera is not a lawyer! 5 -nder the second pararaph of Section ; of Commonwealth 2cto! 1#B, as amended, B the Commission can only athori0e a division chief to hear and investiate a case filed beforeit if he is a lawyer! Jowever, the petitioner is raisin this estion for the first time in this appeal! .he record disclosesthat petitioner never made any obection to the athority of 8r! .alavera to hear the case and to receive the evidenceof the parties! +n the contrary, we find that petitioner had appeared and sbmitted evidence at the hearins condcted

by 8r! .alavera, particlarly the hearins relative to the motion for reconsideration of the order of Iebrary 16, 1957cancellin and revokin its certificate! @e also find that, throh consel, petitioner had entered into areements with8r! .alavera, as hearin officer, and the consel for respondent mnicipality, reardin procedre in order toabbreviate the proceedins! 7 "t is only after the decision in the case trned ot to be adverse to it that petitionerestioned the proceedins held before 8r! .alavera!

.his Cort in several cases has rled that obection to the deleation of athority to hear a case filed before theCommission and to receive the evidence in connection therewith is a procedral, not a risdictional point, and iswaived by failre to interpose timely the obection and the case had been decided by the Commission! 6 Sincepetitioner has never raised any obection to the athority of 8r! .alavera before the Commission, it shold be deemedto have waived sch procedral defect, and consonant with the precedents on the matter, petitionerNs claim that theCommission acted withot or in e'cess of risdiction in so athori0in 8r! .alavera shold be dismissed! 9

! 2nent the second assined error, the ist of petitionerNs contention is that the evidence W consistin of inspectionreports W pon which the Commission based its decision is insfficient and ntrstworthy in that (1) the athors ofsaid reports had not been pt to test by way of cross*e'aminationD () the reports constitte only one side of thepictre as petitioner was not able to present evidence in its defenseD (;) dicial notice was not taken of the testimonyof 8r! Jarry $! $ernardino, former mayor of respondent mnicipality, in %SC Case o! B51#; (the other case, G! !o! 4*11) to the effect that the petitioner had improved its service before its electric power plant was brned on


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%roceedins of 3ecember 15, 19B

C+88"SS"+A

"t appears at the last hearin of this case on September ;, 19B, that an enineer of this Commission has beenordered to make an inspection of all electric services in the province of i0al and on that date the enineer of thisCommission is still ndertakin that inspection and it appears that the said enineer had actally made that inspectionon


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2../! 4--&A

@ith reard to the testimony on the rond for opposition we respectflly sbmit to this Commission or motion tosbmit a written reply toether with a memorandm! 2lso as stated to e'pedite the case and to avoid frther hearinwe will st sbmit or written reply! 2ccordin to or records we are frnished with a copy of the report of


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franchise is a contract, ; at least two competent parties are necessary to the e'ection thereof, and parties are notcompetent e'cept when they are in bein! Jence, it is contended that ntil a corporation has come into bein, in thisrisdiction, by the issance of a certificate of incorporation by the Secrities and &'chane Commission (S&C) itcannot enter into any contract as a corporation! .he certificate of incorporation of the 8oron &lectric was issed bythe S&C on +ctober 17, 19B, so only from that date, not before, did it acire ridical personality and leale'istence! %etitioner concldes that the franchise ranted to 8oron &lectric on 8ay B, 19B when it was not yet inesse is nll and void and cannot be the sbect of the CommissionNs consideration! +n the other hand, 8oron &lectricares, and to which arment the Commission arees, that it was a de facto corporation at the time the franchisewas ranted and, as sch, it was not incapacitated to enter into any contract or to apply for and accept a franchise!

ot havin been incapacitated, 8oron &lectric maintains that the franchise ranted to it is valid and the approval ordisapproval thereof can be properly determined by the Commission!

%etitionerNs contention that 8oron &lectric did not yet have a leal personality on 8ay B, 19B when a mnicipalfranchise was ranted to it is correct! .he ridical personality and leal e'istence of 8oron &lectric bean only on+ctober 17, 19B when its certificate of incorporation was issed by the S&C! # $efore that date, or pendin theissance of said certificate of incorporation, the incorporators cannot be considered as de facto corporation! 5 $tthe fact that 8oron &lectric had no corporate e'istence on the day the franchise was ranted in its name does notrender the franchise invalid, becase later 8oron &lectric obtained its certificate of incorporation and then acceptedthe franchise in accordance with the terms and conditions thereof! .his view is sstained by eminent 2mericanathorities! .hs, 8ciin saysA

.he fact that a company is not completely incorporated at the time the rant is made to it by a mnicipality to se the

streets does not, in most risdictions, affect the validity of the rant! $t sch rant cannot take effect ntil thecorporation is orani0ed! 2nd in "llinois it has been decided that the ordinance rantin the franchise may bepresented before the corporation rantee is flly orani0ed, where the orani0ation is completed before the passaeand acceptance! (8cillin, 8nicipal Corporations, ;rd &d!, Hol! 1, Chap! ;#, Sec! ;#!1)

Iletcher saysA

@hile a franchise cannot take effect ntil the rantee corporation is orani0ed, the franchise may, nevertheless, beapplied for before the company is flly orani0ed!

2 rant of a street franchise is valid althoh the corporation is not created ntil afterwards! (Iletcher, CyclopediaCorp! %ermanent &dition, ev! Hol! B*2, Sec! 661)

2nd .hompson ives the reason for the rleA

(")n the matter of the secondary franchise the athorities are nmeros in spport of the proposition that an ordinancerantin a privilee to a corporation is not void becase the beneficiary of the ordinance is not flly orani0ed at thetime of the introdction of the ordinance! "t is enoh that orani0ation is complete prior to the passae andacceptance of the ordinance! .he reason is that a privilee of this character is a mere license to the corporation ntil itaccepts the rant and complies with its terms and conditions! (.hompson on Corporations, Hol! #, ;rd &d!, Sec! 99)B

.he incorporation of 8oron &lectric on +ctober 17, 19B and its acceptance of the franchise as shown by its actionin prosectin the application filed with the Commission for the approval of said franchise, not only perfected acontract between the respondent mnicipality and 8oron &lectric bt also cred the deficiency pointed ot by thepetitioner in the application of 8oron &"ectric! .hs, the Commission did not err in denyin petitionerNs motion to

dismiss said application and in proceedin to hear the same! .he efficacy of the franchise, however, arose only ponits approval by the Commission on 8arch 1;, 19B;! .he reason is that W

-nder 2ct o! BB7, as amended by 2ct o! 1, a mnicipal concil has the power to rant electric franchises,sbect to the approval of the provincial board and the %resident! Jowever, nder Section 1B(b) of Commonwealth 2cto! 1#B, as amended, the %blic Service Commission is empowered Oto approve, sbect to constittional limitationsany franchise or privilee ranted nder the provisions of 2ct o! BB7, as amended by 2ct o! 1, by any politicalsbdivision of the %hilippines when, in the dment of the Commission, sch franchise or privilee will properlyconserve the pblic interests and the Commission shall in so approvin impose sch conditions as to constrction,eipment, maintenance, service, or operation as the pblic interests and convenience may reasonably reire, andto isse certificates of pblic convenience and necessity when sch is reired or provided by any law or franchise!O.hs, the efficacy of a mnicipal electric franchise arises, therefore, only after the approval of the %blic ServiceCommission! (2lmendras vs! amos, 9 %hil! ;1) !

.he conclsion herein reached reardin the validity of the franchise ranted to 8oron &lectric is not incompatiblewith the holdin of this Cort in Caayan Iishin 3evelopment Co!, "nc! vs! .eodoro Sandiko 7 pon which thepetitioner leans heavily in spport of its position! "n said case this Cort held that a corporation shold have a fll andcomplete orani0ation and e'istence as an entity before it can enter into any kind of a contract or transact any


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bsiness! "t shold be pointed ot, however, that this Cort did not say in that case that the rle is absolte or thatnder no circmstances may the acts of promoters of a corporation be ratified or accepted by the corporation if andwhen sbseently orani0ed! +f corse, there are e'ceptions! "t will be noted that 2merican corts enerally holdthat a contract made by the promoters of a corporation on its behalf may be adopted, accepted or ratified by thecorporation when orani0ed! 6

! .he validity of the franchise and the corporate personality of 8oron &lectric to accept the same havin beenshown, the ne't estion to be resolved is whether said company has the financial alification to operate an electricliht, heat and power service! %etitioner challenes the financial capability of 8oron &lectric, by pointin ot the

inconsistencies in the testimony of 8r!


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@J&&I+&, the two decisions of the %blic Service Commission, appealed from, shold be, as they are herebyaffirmed, with costs in the two cases aainst petitioner i0al 4iht T "ce Co!, "nc! "t is so ordered!

CARAM R. V. CA >7

Doctrine: A $ona /ide corporation is lia$le /or its corporate acts as dul)aut#oried $) its o//icers anddirectors.


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t#at it is not a corporation $ut onl) a partners#ip.

@eld:!" LES. '#e court #ad 3urisdiction $ut Section does not appl).


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dueAl$ert said G;C /ailed to pa) t#e 7ndinstalment$ut t#e latter countered t#at it was t#e /ormer w#o+iolated t#eir contract $) #is /ailure to deli+ert#emanuscript.(ater, Al$ert died and =usto Al$ert !#isadministrator" su$stituted #im. '#e C


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t#e t)pe o/ organiation.


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/is#ing equipments. Now, Lao and C#ua represented t#emsel+es as acting in $e#al/ o/ *cean Xuest

piercing cases

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