VASQUEZ V.

BORJA, 74 PHIL 560 (1944)

FACTS: In January 1932, Antonio Vasquez and Fernando Busuego jointly and severally obligated
themselves to sell to Francisco de Borja 4,000 cavans of palay at P2.10 per cavan (total P8,400)
to be delivered in February 1932.
1. However, what was delivered to Borja was only 2,488 cavans amounting to P5,224.80
and Vasquez refused to deliver the balance of 1,512 cavans or P3,175.20
2. As such, Borja filed an action against Vasquez and Busuego
3. In his answer, Vasquez denied having entered into a contract in his own individual and
personal capacity, either solely or together with Busuego since the contract was entered
into by Borja and Natividad-Vasquez Sabani Development Co Inc, a corporation
organized and existing under the laws of the Philippines. Vasquez was the acting
manager at the time the transaction took place. As such, Borja had no cause of action
against Vasquez
4. The trial court rendered in favor of Borja and ordered Vasquez to pay the sum of
P3,175.20 plus P377.0 with legal interest
5. On appeal, CA modified the amount to P3,2,14.78 with interest. CA found that the sale
made by Vasquez in favor of Borja of 4,000 was in his capacity as acting president and
manager of the corporation.

ISSUE: WON Borja entered into the contract with Vasquez in his personal capacity or as manager
of the Natividad-Vasquez Sabani Devt Co Inc

HELD: 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 owing to a legal fiction and that it
necessarily has to act through its agents, does not make the latter personally liable on a
contract duly entered into, or for an act lawfully performed, by them for or on its behalf. The legal
fiction by which the personality of a corporation is created is a practical reality and necessity.
Without it, no corporate entities may exist and no corporate business may be transacted. Such
legal fiction may be disregarded only when an attempt is made to use it as a cloak to hide an
unlawful or fraudulent purpose. No such thing has been alleged or proven in this case. It was not
alleged or even intimated that Vasquez personally benefitted by contract of sale in question
and that he is merely invoking the legal fiction to avoid personal liability. Neither is it contended
that he entered into said contract for the corporation in bad faith and with intent to defraud
Borja. As such, there is no legal and factual basis upon which to hold Vasquez liable on the
contract either principally or subsidiarily.

DISSENTING:















SAN JUAN STRUCTURAL & STEEL FABRICATORS V. CA, 296 SCRA 631 (1998)
FACTS: In February 1989, San Juan Structural and Steel Fabricators Inc (SJSSFI) entered into an
agreement with Motorich Sales Corp (MSC) for the transfer to it of a parcel of land.
1. Despite repeated demands, MSC refused to execute the Transfer of Rights/Deed of
Assignment which is necessary for the transfer of the title
2. It appears that in April 1989, MSC and ACL Development Corp entered into a contract of
sale over the subject property. By reason of said transfer, the Register of Deeds issued a
new title in the name of MSC, represented by its treasurer Nenita Gruenberg
3. As such, SJSSFI filed an action against MSC and Gruenberg for damages by reason of
their bad faith in refusing to execute a Transfer of Rights/Deed of Assignment
4. In its defense, MSC and Gruenberg alleged that the President and Chairman of MSC not
sign the agreement between SJSSFI and MSC and SJSSFI was aware of said fact; and
that SJSSFI itself drafted the agreement and insisted that Gruenberg accept the P100,000
as earnest money. Assuming arguendo the contract was enforceable, SJSSFI
nevertheless failed to pay in legal tender within the stipulated period
5. The trial court dismissed the complaint citing that there was no evidence to show that
Gruenberg was indeed authorized by MSC to dispute of said property. CA affirmed the
decision but ordered Gruenberg to refund the P100,000 to petitioner, the amount
remitted as down payment or earnest money.
6.
ISSUE: WON the agreement between SJSSFI and MSC is valid

HELD: No. While it is true that Gruenberg, MSCs corporate secretary signed the agreement
transferring the parcel of lot to petitioner San Juan. Such contract cannot bind MSC because it
never authorized or ratified such sale.

A corporation is a juridical person separate and distinct from its stockholders or members.
Accordingly, the property of the corporation is not the property of its stockholders or members
and as such, may not be sold by the stockholders or members without express authorization from
the corporations board of directors.

A corporation may only act through its board of directors or, when authorized either by its
bylaws or by its board resolution, through its officers or agents in the normal course of business.
The general principles of agency govern the relation between the corporation and its officers or
agents, subject to the articles of incorporation, bylaws or relevant provisions of law. Thus, a
corporate officer or agent may represent and bind the corporation in transactions with third
persons to the extent that the authority to do so has been conferred upon him, and this includes
powers which have been intentionally conferred, and also such powers as, in the usual course of
the particular business, are incidental to or may be implied from, the powers intentionally
conferred, powers added by custom and usage, as usually pertaining to the particular officer or
agent, and such apparent powers as the corporation has caused persons dealing with the
officer or agent to believe that it has conferred.

One of the advantages of a corporate form of business organization is the limitation of an
investor's liability to the amount of the investment. This feature flows from the legal theory that a
corporate entity is separate and distinct from its stockholders. However, the statutorily granted
privilege of a corporate veil may be used only for legitimate purposes. On equitable
considerations, the veil can be disregarded when it is utilized as a shield to commit fraud,
illegality or inequity; defeat public convenience; confuse legitimate issues; or serve as a mere
alter ego or business conduit of a person or an instrumentality, agency or adjunct of another
corporation.

The SC also recognized the rule that persons dealing with an assumed agent, whether the
assumed agency be a general or special one bound at their peril, if they would hold the
principal liable, to ascertain not only the fact of agency but also the nature and extent of
authority, the burden of proof is upon them to establish it. Unless duly authorized, treasurer,
whose powers are limited, cannot bind the corporation in a sale of its assets.

CAB: MSC categorically denied that it ever authorized Gruenberg, is treasurer, to sell the subject
parcel of land. Consequently, petitioner had the burden of proving that Gruenberg was in fact
authorized to represent and bind MSC in the transaction. Petitioner failed to discharge this
burden.











































KILOSBAYAN INC V. GUINGONA, 232 SCRA 110 (1994)
FACTS: Petitioners filed a special civil action for prohibition and injunction to prohibit and restrain
the implementation of the Contract of Lease executed by PCSO and Phil Gaming Management
Corp (PGMC) in connection with the online lottery system (lotto)
1. Pursuant to the charter of PCSO, PCSO decided to establish an online lottery system for
the purpose of increasing its revenue base. Upon learning of PCSOs interest in running
lotto, Berjaya Group Berhad organized with some Filipino investors a Philippine
corporation, PGMC, which was intended to provide technical and management
services to PCSO
2. PCSO formally issued a Request for Proposal (RFP) for the Lease Contract of an online
lottery system for PCSO.
3. The Office of the President, then, announced that PGMC had the go-signal to operate
the countrys lotto system
4. Petitioners alleged that PCSO cannot validly enter into the assailed Lease Contract with
PGMC because it is an arrangement wherein PCSO would hold and conduct the online
lottery system in collaboration or association with PGMC in violation of Sec 1(B) of RA
1169 as amended by BP 42, which prohibits PCSO from holding and conducting charity
sweepstakes races, lotteries and other similar activities in collaboration, association or
joint venture with any person, association, company or entity, foreign or domestic
5. PGMC, on the other hand, asserted that it is merely an independent contractor for a
piece of work, i.e. building and maintenance of the lotto system; it is not a co-operator
of the lottery franchise nor is PCSO sharing its franchise in collaboration with PGMC

ISSUE: WON the challenged contract of lease violate the exception which prohibits the PCSO
from holding and conducting lotteries in collaboration, association or joint venture with another

HELD: Yes. A careful analysis and evaluation of the Lease Contract and the contemporaneous
acts of PCSO and PGMC show that the contract in reality is not a contract of lease but one
where a collaboration, association or at least, joint venture, exists between the contracti ng
parties. Collaboration is defined as the acts of working together in a joint project. Association
means the act of a number of persons in uniting together for some special purpose or business.
Joint venture is defined as an association of persons or companies jointly undertaking some
commercial enterprise; generally all contribute assets and share risks.

The contemporaneous acts of PCSO and PGMC show that PCSO had neither funds of its own
nor expertise to operate and manage the lotto system. Because of such constraints, it
mentioned in the RFP, that it was seeking for a suitable contractor which shall build at its own
expense, all the facilities required to operate and maintain the system. The only contribution,
then, of PCSO would have is its franchise or authority to operate the lotto system and the rests,
including the business risks, would be borne by the proponent or bidder.

From the very inception, PCSO and PGMC mutually understood that any arrangement between
them would necessarily leave to the PGMC the technical, operations and management aspects
of the online lottery system while PCSO would primarily provide the franchise, which show that
the intention of both parties was to establish a joint venture.

The intent of establishing a joint venture is shown by the following:
1. The risk-bearing provision in the lease contract is unusual in a lessor-lessee relationship but
inherent in a joint venture
2. PCSO is bound to reimburse PGMC in case of the pre-termination or suspension of
operation of the lotto system through no fault of PGMC. If it were indeed a lease
contract, the payment of the expected profits or rentals for the unexpired portion of the
term of the contract would be enough
PHILEX MINING CORP V. CIR, G.R. NO 148187 (2008)
FACTS: Petitioner Philex Mining Corp entered into an agreement with Baguio Gold Mining Co for
the former to manage and operate the latters mining claim in Benguet Province as evidenced
by Power of Attorney.
1. In the course of managing and operating the project, Philex Mining made advances of
cash and property in accordance with the terms of the agreement. However, the mine
suffered continuing losses over the years which resulted to petitioners withdrawal as
manager of the mine and the eventual cessation of mine operations
2. Subsequently, the parties executed a Compromise with Dation in Payment where in
Baguio Gold agreed to pay its debt of P179,394,000.00 in three segments by first assigning
its tangible assets to Philex Mining, transferring its equitable title in its Philodril l assets and
settling the remaining liability through properties that Baguio Gold may acquire in the
future
3. In its 1982 annual income tax return, petitioner Philex Mining deducted from its gross
income the amount of P112,136,000.00 as loss on settlement of receivables from Baguio
Gold against reserves and allowances. However, BIR disallowed the deduction for bad
debt and assessed petitioner a deficiency income tax
4. Petitioner emphasized that the debt arose out of a valid management contract it
entered into with Baguio Gold. The bad debt deduction represented advances made
by petitioner, which pursuant to the management contract, formed part of Baguio
Golds pecuniary obligations to petitioner
5. CTA rejected petitioners assertions that the advances were made for the mining project
were in the nature of a loan. It instead characterized the advances as petitioners
investment in a partnership with Baguio Gold for the development and exploitation of
the latters mine

ISSUE: WON the agreement between Philex Mining and Baguio Gold is in the nature of a
partnership or joint venture

HELD: Yes. An examination of the Power of Attorney reveals that a partnership or joint venture
was indeed intended by the parties. Under the contract of partnership, two or more persons
bind themselves to contribute money, property or industry to a common fund, with the intention
of dividing the profits among themselves. While a corporation, like petitioner, cannot generally
to a contract of partnership unless authorized by law or its charter, it has been held that it may
enter into a joint venture which is akin to a particular partnership.

Joint venture has generally been understood to mean an organization formed for some
temporary purpose. It is in fact hardly distinguishable from the partnership, since their elements
are similarcommunity of interest in the business, sharing of profits and losses, and a mutual right
of control. The main distinction cited by most in common law jurisdictions is that the partnership
contemplates a general business with some degree of continuity, while the joint venture is
formed for the execution of a single transaction, and is thus of a temporary nature.

The strongest indication that petitioner was a partner in the Sto. Nino mine is the fact that it
would receive 50% of the net profits as compensation under the agreement. The entirety of
the parties contractual stipulations simply leads to no other conclusion than that petitioners
compensation is actually its share in the income of the joint venture.





SMITH, BELL & CO V. NATIVIDAD, 40 PHIL 136 (1919)
FACTS: Smith, Bell & Co, is a corporation organized and existing under the laws of the Philippines.
A majority of its stockholders are British nationals.
1. Petitioner corporation is the owner of a motor vessel, the Bato, built for it in the
Philippines in 1916.
2. The Bato was brought to Cebu for the purpose of transporting the plaintiffs merchandise
between ports in the Philippines
3. Plaintiff applied to register the vessel with the Collector of Customs. However, the
Collector, Natividad refused to issue the certificate since all the stockholders of plaintiff
corporation were not citizens of the United States or of the Philippines

ISSUE: WON the government can deny the registry of the vessel in its coastwise trade to
corporations having alien stockholders

HELD: Yes. While Smith, Bell & Co, a corporation having alien stockholders, is entitled to the
protection afforded by the due process of law and equal protection of the laws, the
government reserves the right to prohibit registry of vessels owned by such corporations within
the purview of the police power. Steamship lines are, in the case of the Philippine islands, the
arteries of commerce. If one be severed, the lifeblood of the nation is lost. If on the other hand,
these arteries are protected, then the security of the country and the promotion of general
welfare is maintained. Boats owned by foreigners, particularly by such solid and reputable firms
as the petitioner, might indeed traverse the Philippine waters for ages without doing any
particular harm. However, some evil-minded foreign might easily take advantage of such lavish
hospitality to chart Philippine waters, to obtain valuable information for unfriendly foreign
powers, to stir up insurrection, or to prejudice Filipino or American commerce.



























STONEHILL V. DIOKNO, 20 SCRA 383 (1967)
FACTS: Respondents, on various dates, issued a total of 42 search warrants against petitioners
Stonehill and/or the corporations of which they were officers, directed to any peace officer to
search the persons aforementioned and/or the premises of their offices, warehouses and/or
residences, and to seize and take possession of the following personal property: Book of
accounts, financial records, vouchers, correspondence, receipts, ledgers, journals, portfolios,
credit journals, typewriters and all other documents/papers showing business transactions, in
connection with violation of Central Bank Laws, Tariff and Custom laws, Internal Revenue and
Revised Penal Code
1. Petitioners alleged that the search warrants were null and void because: (1) they do not
describe with particularity the documents, books and things to be seized; (2) cash money
not included in the search warrants were actually seized; (3) searches and seizures were
made in an illegal manner
2. Respondent-prosecutors contended that the search warrants were valid and issued in
accordance with the law and; the defects of said warrants, if any, were cured by
petitioners consent
3. The SC issued a writ of preliminary injunction. The writ was subsequently dissolved as to
the papers, documents and things seized from the offices of the corporations

ISSUE: WON petitioners may assail the legality of the contested warrants and searches of the
seizures made in the corporations offices

HELD: No. Corporations have their respective personalities, separate and distinct from the
personality of petitioners, regardless of the amount of share of stock or of the interest of each of
them in said corporations. 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 object to an unlawful search
and seizure is purely personal and cannot be availed of by third parties. Consequently,
petitioners 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
whim the seized effects belong, and may not be invoked by the corporate officers in
proceedings against them in their individual capacity.





















BACHE & CO INC V. RUIZ, 37 SCRA 832 (1971)
FACTS: Respondent Vera, CIR, wrote Judge Ruiz requesting for a search warrant against
petitioners Bache & Co and Frederick Seggerman for violation of Sec 46(a) of NIRC in relation to
other provisions thereof, and to authorize BIR examiner De Leon to make and file an application
for search warrant
1. BIR agents then served the search warrant at the offices of petitioner corporation.
Petitioners lawyers protested the search on the ground that no formal complaint or
transcript of testimony was attached to the warrant. Nevertheless, the agents
proceeded with the search which yielded 6 boxes of documents
2. Petitioners then filed a petition with CFI Rizal that the search warrant be quashed,
dissolved or recalled
3. In the meantime, BIR made tax assessments on petitioner corporation in the total amount
of P2,594,729.97 based on the documents seized
4. Petitioners contended, among others, that a corporation is not entitled to protection
against unreasonable search and seizures

ISSUE: WON the petitioner corporation has the right to question the validity of the search warrant

HELD: Yes. As held in the case of Stonehill v. Diokno, the legality of a seizure can only contested
by the party whose rights have been impaired thereby. Since a corporation has a personality
separate and distinct from the personality of its stockholders and officers, it follows that only the
corporation may question the legality of the search warrant.

CAB: The corporation to whom the seized documents belong, and whose rights have thereby
been impaired, is itself a petitioner. On that score, petitioner corporation here stands on a
different footing from the corporations in the Stonehill case.


























BATAAN SHIPYARD & ENGINEERING CO V. PCGG, 150 SCRA 181 (1987)
FACTS: When President Corazon Aquino assumed presidency, she issued EO No. 1 which formed
the Presidential Commission on Good Government (PCGG) with the task to recovery all ill-gotten
wealth accumulated by President Marcos, his immediate family, relatives, subordinates, close
associates, whether located in the Philippines or abroad, including the takeover or sequestration
of all business enterprises and entities owned or controlled by them during his administration.
1. Pursuant to such a sequestration and takeover order was issued against Bataan Shipyard
and Engineering Co (BASECO). BASECO alleged to have been actually owned and
controlled by the Marcoses through dummy stockholders
2. The sequestration order issued in 1986 required, among others, that BASECO produce
corporate records from1973 to 1986 under pain of contempt of the PCGG if it fails to do
so.
3. Petitioner BASECO contended that its rights against self-incrimination and unreasonable
searches and seizure have been transgressed by the sequestration order

ISSUE: WON BASECO may invoke right against self-incrimination and unreasonable search and
seizure

HELD: No. It is elementary that the right against self-incrimination has no application to juridical
persons. A corporation, being a creature of the state, is presumed to be incorporated for the
benefit of the public. It would be a strange anomaly to hold that a state, having chartered a
corporation to make use of certain franchises, could not, in the exercise of sovereignty, inquire
how these franchises have been employed and whether they had been abused, and demand
the production of corporate books and papers for that purpose.

The constitutional safeguard against unreasonable searches and seizures finds no application to
the case at bar either. There has been no search undertaken by any agent or representative of
the PCGG, and of course no seizure on the occasion thereof.
























PNB V. CA, 83 SCRA 237 (1987)
FACTS: PHILAMGEN, as surety, filed an action against Tapnio and Gueco for the recovery of
P2,379.71 paid by PHILAMGEN to PNB on behalf of Tapnio and Gueco pursuant to an indemnity
agreement. PNB was made third-party defendant by Tapnio and Gueco on the theory that their
failure to pay the debt was due to the fault or negligence of the petitioner bank.
1. Phil American General Insurance Co (PHILAMGEN) executed a bond with Gueco and
Tapnio as principal, in favour of PNB to guarantee the payment of Gueco with said bank.
To guarantee payment, Gueco and Tapnion executed an indemnity agreement
2. When demand was made upon her by Philamgen to pay her debt to the bank, she
informed PHILAMGEN that she did not consider herself indebted to the bank because
she had an agreement with one Jacobo-Nazon whereby she had leased to the latter
her unused export sugar quota for 1956-1957 agricultural year, consisting P1,000 piculs at
the rate of P2.80 per picul (P2,800.00), which was already in excess of her obligation
guaranteed by plaintiffs bond
3. Petitioner argued that as an assignee of the sugar quota of Tapnio, it has the right, both
under its own charter and under the corporation law, to safeguard and protect its rights
and interests under the deed of assignment, which include the right to approve or
disapprove the said lease of sugar quota and in the exercise of that authority, its board
of directors necessarily had authority to determine and fix the rental price per picul of the
sugar quota subject of the lease between private respondents and Tuazon.
4. Tuazon subsequently informed PNB that he was no longer interested in continuing the
lease of sugar quota allotment. The crop year 1956-1957 ended and Tapnio failed to
utilize her sugar quota, resulting in the loss amounting to P2,800 which she should have
received the lease in favour of Tuazon had been implemented
5. The trial court ruled PNB liable to pay Tapnioas third-party plaintiff P2,379.71 plus 12%
interest per annum which Tapnio was ordered to pay PHILAMGEN. CA affirmed.

ISSUE: WON PNB should be liable for tort

HELD: Yes. Considering that all accounts of Tapnio with PNB was secured by chattel mortgage
on standing corps, assignment of leasehold rights and interests on her properties and surety
bonds, there was no reasonable basis for the Board of Directors of petitioner to have rejected
the lease agreement because of a measly sum of P200

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 he 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.










NAGUIAT V. NLRC, 269 SCRA 564 (1997)
FACTS: Petitioner Clark Field Taxi Inc (CFTI) held a concessionaires contract with the Army Air
Force Exchange Services (AAFES) for the operation of taxi services within Clark Base. Sergio
Naguiat was CFTIs president, while Antolin Naguiat was its vice-president. Like CFTI, Naguiat
Enterprises was a family-owned corporation
1. Private respondents were previously employed by CFTI as taxicab drivers. During their
employment they were required to pay a daily boundary fee. The drivers worked at least
3-4 times a week, depending on the availability of taxicabs
2. Due to the phase-out of the US military bases in the Philippines, AAFES was dissolved, and
the services of individual respondents were officially terminated
3. The AAFES taxi drivers union and CFTI held negotiations with regard to the separation
benefits that should be awarded in favor of the drivers. Most of the drivers accepted
P500 for every year of service as severance pay but private respondents refused to
accept theirs
4. Private respondents, then, filed a complaint before NLRC. They alleged that they were
regular employees of Naguiat Enterprises. They claimed to have been assigned to
Naguiat Enterprises after having been hired by CFTI
5. Petitioners insist that Naguiat Enterprises is a separate and distinct personality which
cannot be held solidarily liable for the obligations of CFTI.

ISSUE: WON Naguiat Enterprises can be held liable for the claims of the drivers

HELD: No. Based on the evidence provided by both parties, there is no substantial basis to hold
that Naguiat Enterprises is an indirect employer of private respondents much less a labor-only
contractor. On the contrary, petitioners submitted documents such as the drivers applications
for employment with CFTI and payroll of Naguiat Enterprises showing none of the individual
respondents were its employees.

The indubitable conclusion is that CFTI was the actual and direct employer of private
respondents, and that Naguiat Enterprises was neither their direct employer nor labor-only
contractor.

SC held that our jurisprudence is wanting as to the definite scope of corporate tort. Essentially,
tort consists in the violation of a right given or the omission of a duty imposed by law. Art 283
LC mandates the employer to grant separation pay to employees in case of closure or cessation
of operations or establishment or undertaking not due to serious business losses or financial
reverses, which is the condition at bar. CFTI failed to comply with this law-imposed duty or
obligation. Consequently, its stockholders who are actively engaged in the management or
operation of the business should be held personally liable.
















ARATEA V. SUICO, 518 SCRA 501 (2007)
FACTS: Petitioners Aratea and Canonigo are the controlling stokholders of Samar Mining Devt
Corp (SAMDECO), a domestic corporation engaged in mining operations in Western Samar.
Suico is a businessman engaged in export and general merchandise
1. Suico entered into a Memorandum of Agreement with SAMDECO that Suico would
extend loans and cash advances to SAMDECO in exchange for the exclusive right to
market 50% of the total coal extracted by the corporation
2. Pursuant to the MOA, Suico started releasing loans and cash advances to SAMDECO.
However, SAMDECO, through Aratea and Canonigo, prevented the full implementation
of the marketing arrangement by not accepting the prices offered by Suicos coal
buyers even though such process were competitive and fair enough, giving no other
explanation for such refusal other than saying that the price was too low.
3. Because of non-payment, Suico filed an action for sum of money and damages against
SAMDECO, Aratea and Canonigo

ISSUE: WON Aratea and Canonigo are solidarily liable to pay the loans and cash advances
extended by Suico to SAMDECO

HELD: Yes. A corporation is a juridical entity with legal personality separate and distinct from
those acting for an in its behalf, in general from the people comprising it. The general rule is that
obligations incurred by the corporation, acting through its directors, officers and employees, are
its sole liabilities. However, solidary liabilities may be incurred only when exceptional
circumstances warrant such as:

(1) When the directors and trustee, or in appropriate cases, the officers or a corporation:
(a) Act in bad faith or with gross negligence in directing the corporate affairs

CAB: Petitioners Aratea and Canonigo, despite having separate and distinct personalities from
SAMDECO may be held personally liable for the loans and advance made by Suico to
SAMDECO which they represent on account of their bad faith in carrying out the business of the
corporation. They acted in bad faith when they, as officers of SAMDECO, unreasonably
prevented Suico from selling his part of the coal-produce of the mining site, in gross violation of
their MOA.


















PEOPLE V. TAN BOON KONG, 54 PHIL 607 (1930)
FACTS: In 1924, The accused, Tan Boon Kong, as a domestic corporation, engaged in the
purchase and sale of sugar, bayon, copra and other native products and as such subject to
the payment of internal revenue tax upon its sale.
1. Accused only declared P2,352,761.94 instead of the correct amount ofP2,543,303.44. The
unpaid amount of P190,541.50 amounted to 1 percent of the said undeclared sales.
2. The lower court held that the offense charged must be regarded as committed by the
corporation and not by its officials or agents.

ISSUE: WON the corporation can be held criminally liable

HELD: No. It is well-settled that a corporation can act only through its officers and agents, and
where the business itself violates the law, the correct rule is that all who participate shall be
liable.

CAB: The information alleges that the defendant was the manager of a corporation which was
engaged in the business as a merchant, and as such manager, he made a false return, for
purposes of taxation, of the total amount of sale made by said false return constitutes a violation
of law. The defendant, as the author of the illegal act, must necessarily answer for its
consequences, provided the allegations are proven.

































SIA V. PEOPLE, G.R. NO 121 SCRA 655 (1983)
FACTS: Accused Sia was the General Manager of Metal Manufacturing Company of the Phil. Inc
(MEMAP), engaged in the manufacture of steel office equipment. Because his company was in
need of raw materials to be importance from abroad, Sia applied for a letter of credit with
Continental Bank, to import steel sheets from Japan.
1. The bank approved the application and the letter of credit was opened for $18,300.
2. MEMAP obtained delivery of the cold rolled steel sheets valued at P71,023.60 under a
trust receipt in which the steel sheets were consigned to Continental Bank. The
agreement provided that the accused was to hold the steel sheets in trust, sell them and
turnover the proceeds to the bank
3. However, Sia failed to make good with his obligation.

ISSUE: WON Sia may be held liable for the crime charged against him

HELD: No. As held in the Tan Boon Kong case, for crimes committed by a corporation, the
responsible officers thereof would personally bear the criminal liability.

However, the Tan Boon Kong case may not be squarely applicable to the instant case in that
the corporation was directly required by law to do an act in a given manner, and the same law
makes the person who fails to perform the act in the prescribed manner expressly liable
criminally.

In the present case, the act alleged to be a crime is not in the performance of an act directly
ordained by law to be performed by the corporation. The act is imposed by agreement of the
parties, as a practice observed in the usual pursuit of a business or commercial transaction.

In the absence of an express provision of law making the petitioner liable for the criminal offense
committed by the corporation of which he is a president, as in fact there is no such provision in
the Revised Penal Code under which petitioner is being prosecuted, the existence of a criminal
liability on his part may not be said to be beyond any doubt























COMETA . CA, 301 SCRA 459 (1999)
FACTS: Honeycomb Builders Inc (HBI) applied for a license to sell condominium units on a land
mortgaged to State Investment (SITI).
1. The HLURB required HBI to submit an affidavit attesting that the mortgagee, SITI, agrees to
release the mortgage on the property as soon as the full purchase price is paid.
2. An affidavit was submitted but SITI claimed it was a forgery
3. As such, SITI filed a complaint against HBI president Guevarra for falsification of public
documents. This was later dismissed.
4. Guevarra then filed a complaint for malicious prosecution against Cometa and SITI

ISSUE: WON the inclusion of HBI, being a corporation, as a real party in interest in the criminal
case was correct

HELD: Yes. It is true that a criminal case can be filed against officers of a corporation and not the
corporation itself. It does not follow, however, that the corporation cannot be a real party-in-
interest for the purpose of bring a civil action for malicious prosecution.

In Cometa v. CA, the Court clarified that although a criminal case can only be filed against the
officers of a corporation and not against the corporation itself, it does not follow that the
corporation cannot be a real party-in-interest for the purpose of bringing a civil action for
malicious prosecution for the damages incurred by the corporation for the criminal proceedings
brought against its officer.

CAB: The documentary evidence show that the papers of Guevent and HBI prove that
Guevarra is an incorporator, stockholder, director and officer of said corporations.



























MAMBULAO LUMBER CO V. PNB, 22 SCRA 359 (1968)
FACTS: Mambulao defaulted on its laon with PNB, who then foreclosed its real and movable
properties.
1. In their chattel mortgage agreement, the parties agreed that there should be an auction
sale of the chattel,s said auction sale should be conducted in Manila and not Camarines
Norte
2. Despite this, PNB auctioned the chattels in Camarines Norte
3. Mambulao then filed an action against PNB, claiming that foreclosure of its chattels
should be null and void since the sale was not conducted in accordance with the
provisions of the Chattel Mortgage Law and the venue agreed upon by the parties in the
mortgage contract

ISSUE: WON Mambulao Lumber Co is entitled to moral damages on the account of the violation
of the mortgage contract

HELD: No. Plaintiffs claim for moral damages have no legal or factual basis. Obviously, an
artificial person like a corporation cannot experience physical sufferings, mental anguish, fright,
serious anxiety, wounded feelings, moral shock or social humiliation, which are basis of moral
damages. A corporation may have a good reputation which, if besmirched, may also be a
ground for the award of moral damages. The same cannot be considered under the facts of
this case, however, not only because it is admitted that Mambulao Lumber Co had already
ceased in its business operation at the time of the foreclosure sale of the chattels, but also for
the reason that whatever adverse effects of the foreclosure sale of the chattels could have
upon its reputation or business standing would undoubtedly be the same whether the sale was
conducted in Camarines Norte or in Maninla, which the place agreed upon by the parties in the
mortgage contract.



























ABS-CBN BROADCASTING CORP V. CA, 301 SCRA 589 (1999)
FACTS: ABS-CBN and Viva for the formers exclusive rights to air some Viva films. Viva, then, sold
the films to RBS station.
1. ABS-CBN sued Viva and RBs, claiming that it already had an agreement which Viva
denied.
2. RBS, in turn, sued ABS-CBN for moral and exemplary damages.
3. The court ruled that RBS is entitled to moral and exemplary damages since RBSs
reputation was debased by the filing of the civil case against the corporation and Viva
Films, and by the non-showing of one of the movies
4. ABS-CBN contended that there was no clear basis for the award of moral and exemplary
damages. The claims for such damages did not arise from any contractual dealings or
from specific acts committed by ABS-CBN against RBS that may be characterized as
wanton, fraudulent, or reckless.
5. RBS, on the other hand, cited People v. Manero where it stated that a juridical entity can
recover moral and exemplary damages if it has a good reputation that is debased
resulting in social humiliation

ISSUE: WON the award of moral damages is proper

HELD: No. Moral damages are in the category of an award designed to compensate the
claimant for actual injury suffered and not to impose a penalty on the wrongdoer. The award is
not meant to enrich the complainant at the expense of the defendant, but to enable the
injured party to obtain means, diversion or amusements that will serve to obviate the moral
suffering he has undergone.

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 can be experience only by one having a nervous system. The statement in People v.
Manero and Mambulao Lumber Co v. PNB that a corporation may recover moral damages if it
has a good reputation that is debased resulting in social humiliation is an obiter dictum. On this
score, the award of damages must be set aside since RBS is a corporation.




















FILIPINAS BROADCASTING NETWORK V. AGO MEDICAL AND EDUCATIONAL CENTER, G.R. NO
141994 (2005)
FACTS: FBNI owns a radio station where the program EXPOSE is aired. Acting on the supposed
complaints of some AMEC students, the hosts of EXPOSE uttered libellous remarks against
AMEC
1. AMEC sued FBNI for libel and claimed moral damages
2. FBNI argued that it cannot do so since it is a juridical person

ISSUE: WON AMEC is entitled to moral damages

HELD: Yes. A juridical person is generally not entitled to moral damages because, unlike a natural
person, it cannot experience physical suffering or such sentiments as wounded feelings, serious
anxiety, mental anguish or moral shock. The statement in Mambulao Lumber Co v. PNB that a
corporation may have a good reputation, which, if besmirched, may also be a ground for the
award of moral damages is an obiter dictum.

Nevertheless, AMECs claim for moral damages falls under Art 2219(7) NCC which expressly
provides the recovery of moral damages in cases of libel, slander or any other form of
defamation. Art 2219(7) does not qualify whether the plaintiff is a natural or juridical person.
Therefore, a juridical person such as a corporation can validly complain for libel or any other
form of defamation and claim for moral damages.

Moreover, where the broadcast is libellous per se, the law implies damages. In such a case,
evidence of an honest mistake or the want of character or reputation of the party libelled goes
only in mitigation of damages. Neither in such a case is the plaintiff required to introduce
evidence of actual damages as a precondition to the recovery of some damages. In this case,
the broadcasts were libellous per se. Thus, AMEC is entitled to moral damages


























CRYSTAL V. BPI, G.R. NO 172428 (2008)
FACTS: Spouses Crystal obtained a loan in behalf of Cebu Contractors Consortium Co (CCCC)
from BPI. The loan was secured by chattel mortgage on heavy equipment and machinery of
CCC
1. CCCC failed to pay its loans to BPI when they became due. CCCC, as well as the
spouses, failed to pay their obligations despite demands.
2. Thus, BPI resorted to the foreclosure of the chattel mortgage and the real estate
mortgage
3. Because there was still a deficiency, BPI filed an action for sum of money against CCC
and spouses Crystal. The trial court ruled in favor of BPI
4. Subsequently, the spouses filed an injunction with damages claiming that the foreclosure
of the real estate mortgages was illegal because BPI should have exhausted CCCCs
properties first since they were mere guarantors of the renewed loans. The trial court
ruled in favor of BPI and ordered the spouses to pay BPI moral and exemplary damages

ISSUE: WON BPI is entitled to moral damages

HELD: No. BPI is not entitled to moral damages. A juridical person is generally not entitled to
moral damages because, unlike a natural person, it experience physical suffering or such
sentiments as wounded feelings, serious anxiety, mental anguish or moral shock. CA found BPI as
being famous and having gained its familiarity and respect not only in the Philippines but also in
the whole world because if its good will and good reputation must protect and defend the
same against unwarranted suits such as the case at bar.

In more recent cases such as ABS-CBN Corp v. CA and FBNI v. AMEC, the Court held that the
statements in Manero and Mambulao were mere obiter dictum, implying that the award of
moral damages to corporations is not a hard and fast rule. Indeed, while the Court may allow
the grant of moral damages to corporations, it is not automatically granted; there must still be
proof of the existence of the factual basis of the damage and its causal relation to the
defendants acts. This is because moral damages are in the category of an award designed to
compensate the claimant for actual injury suffered and not to impose a penalty on the
wrongdoer.

CAB: The spouses complaint against BPI proved to be unfounded but it does not automatically
entitle BPI to moral damages. Although the institution of a clearly unfounded civil suit can at
times be a legal justification for an award of attorneys fees, such filing, however, has almost
invariably been held not to be a ground for an award of moral damages. This is because the
law could not have meant to impose a penalty on the right to litigate. Otherwise, moral
damages must every time be awarded in favor of the prevailing defendant against an
unsuccessful plaintiff.