UNION GLASS & CONTAINER CORPORATION and CARLOS PALANCA, JR., in his capacity as President o Union G!ass & Container Corporation "s. T#E SECURITIES AN$ E%C#ANGE CO&&ISSION and CAROLINA #O'ILE(ANo"e)*er +,, -.,/ Facts; This petition seeks to annul the Order of the Securities and Exchange Commission, upholding its jurisdiction in SEC Case No. !"#, entitled $Carolina %ofile&a, 'ersus (e'elopment )ank of the *hilippines$ %ofile&a, is a stockholder of *ioneer +lass ,-c is engaged in the manufacture of glass,are. *ioneer +lass had o.tained 'arious loans from ()*. /s securit0, *ioneer +lass mortgaged its assets to the ()*. The proceeds ,ere used in the construction of a glass plant in 1osario, Ca'ite, and the operation of se'en silica mining claims. Through the con'ersion into e2uit0 of the accumulated unpaid interests amounting to *#.3 million as of 456#, and su.se2uentl0 increased .0 another *. million in 4567, ()* ,as a.le to get three, regular seats in the .oard! of directors. 8n 9arch, 456:, suffering from li2uidit0 pro.lems, *ioneer +lass entered into a dacion en pago agreement ,ith ()*, in full satisfaction of the o.ligations in the amount of *#5,!!!,!!!.!!. *art of the assets transferred ,as the glass plant in Ca'ite, ,hich ()* sold to ;nion +lass. On 45:4, %ofile&a filed a complaint .efore Securities and Exchange Commission against the ()*, ;nion +lass and *ioneer +lass. Of the fi'e causes of action, onl0 the first cause of action concerned ;nion +lass. Said first cause of action ,as .ased on the alleged illegalit0 of the aforesaid dacion en pagoresulting from< =4> the supposed unilateral and unsupported under'aluation of the assets of *ioneer +lass co'ered .0 the agreement; => the self?dealing indulged in .0 ()*, ha'ing acted .oth as stockholder-director and secured creditor of *ioneer +lass; and ="> the ,rongful inclusion .0 ()* in its statement of account of *79 as due from *ioneer +lass ,hen the same had alread0 .een con'erted into e2uit0. SEC %earing Officer 1e0es granted the motion to dismiss for lack of jurisdiction. %o,e'er, upon motion for reconsideration, %earing Officer 1e0es re'ersed his original order .0 upholding the SEC@s jurisdiction. Athe present action is in the form of a deri'ati'e suit instituted .0 a stockholder for the .enefit of the corporation, A*ioneer +lass Aprincipall0 against another stockholder, (e'elopment )ank of the *hilippines, for alleged illegal acts and gross .ad faith ,hich resulted in the dacion en pagoarrangement. ;nion +lass and Container Corporation, its inclusion as a part0?respondent .0 'irtue of its .eing an indispensa.le part0 to the present action, it .eing in possession of the assets su.ject of the dacion en pago and, therefore, situated in such a ,a0 that it ,ill .e affected .0 an0 judgment thereon 8ssue; BON SEC has jurisdiction %eld - ratio; None, re'ersed. ;nion +lass dropped from case ,-o prejudice to a separate suit .efore a regular court 8n the ordinar0 course of things, ;nion +lass, should .e joined as part0?defendant under the general rule ,hich re2uires the joinder of e'er0 part0 ,ho has an interest in or lien on the propert0 su.ject matter of the dispute. Such joinder of parties a'oids multiplicit0 of suits. )ut since petitioner ;nion +lass has no intra?corporate relation ,ith either the complainant or the ()*, its joinder as part0?defendant .rings the cause of action asserted against it outside the jurisdiction of the respondent SEC. The jurisdiction of the SEC is delineated .0 Section # of *( No. 5!?/ as follo,s< Sec. #. 8n addition to the regulator0 and adjudicati'e function of the Securities and Exchange Commission o'er corporations, partnerships and other forms of associations registered ,ith it as expressl0 granted under existing la,s and de'ices, it shall ha'e original and exclusi'e jurisdiction to hear and decide cases in'ol'ing< a> (e'ices and schemes emplo0ed .0 or an0 acts, of the .oard of directors, .usiness associates, its officers or partners, amounting to fraud and misrepresentation ,hich ma0 .e detrimental to the interest of the pu.lic and-or the stockholders, partners, mem.ers of associations or organiCations registered ,ith the Commission .> Contro'ersies arising out of intra?corporate or partnership relations, .et,een and among stockholders, mem.ers or associates; .et,een an0 or all of them and the corporation, partnership, or association of ,hich the0 are stockholders, mem.ers or associates, respecti'el0; and .et,een such corporation, partnership or association and the state insofar as it concerns their indi'idual franchise or right to exist as such entit0; c> Contro'ersies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships or associations. Section " of *( No. 5!?/ confers upon the latter $a.solute jurisdiction, super'ision, and control o'er all corporations, partnerships or associations, ,ho are grantees of primar0 franchise and-or license or permit issued .0 the go'ernment to operate in the *hilippines ... $ The principal function of the SEC is the super'ision and control o'er corporations, partnerships and associations ,ith the end in 'ie, that in'estment in these entities ma0 .e encouraged and protected, and their acti'ities pursued for the promotion of economic de'elopment. # Thus the la, explicitl0 specified and delimited its jurisdiction to matters intrinsicall0 connected ,ith the regulation of corporations, partnerships and associations and those dealing ,ith the internal affairs of such corporations, partnerships or associations. Other,ise stated, in order that the SEC can take cogniCance of a case, the contro'ers0 must pertain to an0 of the follo,ing relationships .et,een the corporation, partnership or association and the pu.lic;=.> .et,een the corporation, partnership or association and its stockholders, partners, mem.ers, or officers;=c> .et,een the corporation, partnership or association and the state in so far as its franchise, permit or license to operate is concerned; and=d> among the stockholders, partners or associates themsel'es. The case should .e tried and decided .0 the court of general jurisdiction, the 1egional Trial Court. This 'ie, is in accord ,ith the rudimentar0 principle that administrati'e agencies, like the SEC, are tri.unals of limited jurisdiction7 and, as such, could ,ield onl0 such po,ers as are specificall0 granted to them .0 their ena.ling statutes. Bhile the Rules of Court, ,hich applies suppletoril0 to proceedings .efore the SEC, allo,s the joinder of causes of action in one complaint, such procedure ho,e'er is subject to the rules regarding jurisdiction, venue and joinder of parties. )ut such action, if instituted, shall .e suspended to a,ait the final outcome of SEC Case No. !"#, for the issue of the 'alidit0 of the dacion en pago posed in the last mentioned case is a prejudicial 2uestion. SPOUSES JOSE A0EJO AN$ AURORA A0EJO, TELEC. TRONIC S1STE&S, INC.,"s. #ON. RA'AEL $E LA CRU2, JU$GE O' T#E REGIONAL TRIAL COURT, SPOUSES AGAPITO 0RAGA AN$ 3IRGINIA 0RAGA, 3IRGILIO 0RAGA AN$ NOR0ERTO 0RAGA POC4ET 0ELL P#ILIPPINES, INC., AGAPITO T. 0RAGA, 3IRGILIO T. 0RAGA, NOR0ERTO 0RAGA, and 3IRGINIA 0RAGA,"s. T#E #ONORA0LE SECURITIES AN$ E%C#ANGE CO&&ISSION, TELECTRONIC S1STE&S, INC., JOSE A0EJO, JOSE LUIS SANTIAGO, SI&EON A. &IRA3ITE, SR., AN$RES T. 3ELAR$E AN$ L. 5UI$ATO 0AN$OLINO&ay -., -.,6 Facts; These t,o cases in'ol'e the 2uestion of ,ho, .et,een the 1egional Trial Court and the Securities and Exchange Commission DSECE, has original and exclusi'e jurisdiction o'er the dispute .et,een the principal stockholders of the corporation *ocket )ell, a 'oice paging corporation,$ namel0, the spouses /.ejo and the purchaser, Telectronic of their 4"",!!! minorit0 shareholdings Dfor *# millionE and of 7",!!! shares registered in the name of Firginia )raga co'ered .0 fi'e stock certificates endorsed in .lank .0 her Dfor *4,763,3#!.!!E, and the spouses )raga erst,hile majorit0 stockholders. Bith the said purchases, Telectronics ,ould .ecome the majorit0 stockholder, holding #7G. Telectronics re2uested the corporate secretar0 Nor.erto )raga, to register and transfer to its name, and those of its nominees the total 457,!!! *ocket )ell shares in the corporation@s transfer .ook. Nor.erto )raga, the corporate secretar0 and son of the )ragas, refused asserting that the )ragas claim preempti'e rights o'er the 4"",!!! /.ejo shares and that Firginia )raga ne'er transferred her 7",!!! shares to Telectronics .ut had lost the fi'e stock certificates. This triggered off the series of intert,ined actions D.oth in SEC H 1TCE, all centered on the 2uestion of jurisdiction o'er the dispute, ,hich ,ere to culminate in the filing of the t,o cases at .ar. /)EIOS ?J SEC< 9andamus< to compel Nor.erto )raga to register; T1O< To pre'ent )ragas from disposing assets )1/+/S ?J SEC< (ismissal of a.o'e )1/+/S ?J 1TC< 1escission of sale due to preempti'e rights The )ragas assert that the regular ci'il court has original and exclusi'e jurisdiction as against the Securities and Exchange Commission, ,hile the /.ejos claim the contrar0. Nor.erto )raga, contends that the SEC has no jurisdiction since it does not in'ol'e an intracorporate contro'ers0 .et,een stockholders, the principal petitioners therein, Telectronics, not .eing a stockholder of record of *ocket )ell. 8ssue; BON SEC has jurisdiction %eld - ratio; Kes, 1TC prohi.ited from proceeding ,- ci'il case; T1O lifted; 9andamus proceed immediatel0; recei'ership implemented The dispute at .ar, is an intracorporate dispute that has arisen .et,een and among the principal stockholders of the corporation *ocket )ell due to the refusal of the corporate secretar0 to perform his $ministerial dut0$ to record the transfers of the corporation@s controlling D#7GE shares of stock, co'ered .0 dul0 endorsed certificates of stock, in fa'or of Telectronics. 9andamus in the SEC ,as properl0 resorted to under 1ule LL8, Section 4 of the SEC@s Ne, 1ules of *rocedure, 3 ,hich pro'ides for the filing of such petitions ,ith the SEC. Section " of said 1ules further authoriCes the SEC to $issue orders expediting the proceedings ... and also =to> grant a preliminar0 injunction for the preser'ation of the rights of the parties pending such proceedings, $ The complaint of the )ragas for annulment of the sales 2uestions the 'alidit0 of the transfer and endorsement of the certificates of stock, claiming alleged pre?empti'e rights. Such dispute c learl0 in'ol'e@s controversies "between and among stockholders, $ as to the /.ej os@ right to sell and dispose of their shares to Telectronics, the 'alidit0 of the latter@s ac2uisition of Firginia )raga@s shares, ,ho .et,een the )ragas and the /.ejos@ transferee should .e recogniCed as the controlling shareholders of the corporation, ,ith the right to elect the corporate officers and the management and control of its operations. Such a dispute fall ,ithin the original and exclusi'e jurisdiction of the SEC to decide, under Section # of *.(. 5!?/, a.o'e?2uoted. "Nowhere does the law [PD !"#$% empower an& Court of 'irst (nstance [now Regional )rial Court% to interfere with the orders of the Commission,$ # and conse2uentl0 $an& ruling b& the trial court on the issue of ownership of the shares of stock is not binding on the Commission * for want of jurisdiction+ The dispute therefore clearl0 falls ,ithin the general classification of cases ,ithin the SEC@s original and exclusi'e jurisdiction to hear and decide,. 8nsofar as the )ragas and their corporate secretar0@s refusal on .ehalf of the corporation *ocket )ell to record the transfer of the #7G majorit0 shares to Telectronics ma0 .e deemed a de'ice or scheme amounting to fraud and misrepresentation emplol0ed .0 them to keep themsel'es in control of the corporation to the detriment of Telectronics and the /.ejos, the case falls under paragraph ,a-. The dispute is like,ise an intra?corporate contro'ers0 .et,een and among the majorit0 and minorit0 stockholders as to the transfer and disposition of the controlling shares of the corporation, failing under paragraph ,b-. Considering the announced polic0 of *( 5!?/, the expanded jurisdiction of the respondent Securities and Exchange Commission under said decree extends exclusi'el0 to matters arising from contracts in'ol'ing in'estments in pri'ate corporations, partnerships and associations.$ The dispute also concerns the fundamental issue of,hether the )ragas or Telectronics ha'e the right to elect the corporate directors and officers and manage its .usiness and operations, ,hich falls under paragraph ,c-. 8n *hilex 9ining Corp. '. 1e0es, : the Court spelled out that".an intra#corporate controvers& is one which arises between a stockholder and the corporation+ )here is no distinction, /ualification, nor an& e0emption whatsoever+ The pro'ision is .road and co'ers all kinds of contro'ersies .et,een stockholders and corporations. The issue of ,hether or not a corporation is .ound to replace a stockholder@s lost certificate of stock is a matter purel0 .et,een a stockholder and the corporation. The )ragas contend that Telectronics, as .u0ertransferee of the #7G majorit0 shares is not a registered stockholder, .ecause the0, through their son the corporate secretar0, appear to ha'e refused to perform $the ministerial dut0 of recording transfers of shares of stock of the corporation of ,hich he is the secretar0,$ and that the dispute is therefore, not an intracorporate one. )his contention begs the /uestion which must properl& be resolved b& the 12C, but which the& would prevent b& their own act, through their son, of .locking the due recording of the transfer and cannot .e sanctioned. The dispute .et,een the )ragas and Telectronics as to the sale and transfer for *4,763,3#!.!! of Firginia )raga@s 7".!!! shares co'ered .0 Street certificates dul0 endorsed in .lank .0 her is ,ithin the special competence and jurisdiction of the SEC, dealing as it does ,ith the free transferabilit& of corporate shares, particularl0 street certificates,$ as guaranteed .0 the Corporation Code and its proclaimed polic0 of encouraging foreign and domestic in'estments in *hilippine pri'ate corpora. tions and more acti'e pu.lic participation therein for the *romotion of economic de'elopment. )ut as to the sale and transfer of the /.ejos@ shares, the )ragas cannot oust the SEC of its original and exclusi'e jurisdiction to hear and decide the case, .0 .locking through the corporate secretar0, their son, the due recording of the transfer and sale of the shares in 2uestion and claiming that Telectronics is not a stockholder of the corporation M ,hich is the 'er0 issue that the SEC is called upon to resol'e. /s the SEC maintains, $There is no re/uirement that a stockholder of a corporation must be a registered one in order that,the 1ecurities and 20change Commission ma& take cogni3ance of a suit seeking to enforce his rights as such stockholder.$ 43 This is .ecause the SEC .0 express mandate has $a.solute jurisdiction, super'ision and control o'er all corporations$ and is called upon to enforce the pro'isions of the Corporation Code, among ,hich is the stock purchaser.s right to secure the corresponding certificate in his name under the provisions of 1ection *4 of the Code. Needless to sa0, an& problem encountered in securing the certificates of stock representing the investment made b& the bu&er must .e expeditiousl0 dealt ,ith through administrati'e mandamus proceedings ,ith the SEC, rather than through the usual tedious regular court procedure. Furthermore, as stated in the SEC order of /pril 4", 45:", notice given to the corporation of the sale of the shares and presentation of the certificates for transfer is ,e/uivalent to registration< $Bhether the refusal of the DcorporationE to effect the same is i'alid or not is still su.ject to the outcome of the hearing on the merits of the case. 8n this era of clogged court dockets, the need for specialiCed administrati'e .oards or commissions ,ith the special kno,ledge, experience and capa.ilit0 to hear and determine promptl0 disputes on technical matters or essentiall0 factual matters, su.ject to judicial re'ie, in case of gra'e a.use of discretion, has .ecome ,ell nigh indispensa.le. Thus, the Corporation Code D).*. No. 46:E enacted on 9a0 4, 45:! specificall0 'ests the SEC ,ith the 1ule?making po,er in the discharge of its task of implementing the pro'isions of the Code and particularl0 charges it ,ith the dut0 of pre'enting fraud and a.uses on the part of controlling stockholders, directors and officers AL&A &AGALA$, "s. PRE&IERE 'INANCING CORP&ay ++, -..+ Facts; This is an appeal from the decision of the 1egional Trial Court ordering appellant *remiere Financing to pa0 appellee 9agalad *#!,!!!.!!, the principal o.ligation, plus interest and damages. *remiere is engaged in soliciting and accepting mone0 market placements or deposits. On Septem.er 45:" ,ith expired permit to issue commercial papers and ,ith intention to defraud its creditors, *remiere misled 9agalad into making a mone0 market placement of *#!,!!!.!! at G interest per annum. /side from the receipt, *remier like,ise issued t,o *(Cs in the total sum of *#4,!65.!! and assigned to 9agalad its recei'a.le from a certain Saman for the same amount. Bhen the said checks ,ere presented for pa0ment, the dra,ee .ank dishonored the checks for lack of sufficient funds. *remiere, for no 'alid reason, failed and refused to honor such 9agaladNs demands. On Ianuar0 45:3, 9agalad filed a complaint for damages. *remiere filed a motion for reconsideration alleging that the Securities and Exchange Commission DSECE has exclusi'e and original jurisdiction o'er a corporation under a state of suspension of pa0ments. 8ssue; BON SEC has jurisdiction %eld - ratio; Kes, re'ersed 9agalad@s complaint alleges acts amounting to fraud committed .0 *remiere, the SEC must .e held to retain its original and exclusi'e jurisdiction o'er the case, despite the fact that the suit in'ol'es collection of sums of mone0 paid to said corporation, the reco'er0 of ,hich ,ould ordinaril0 fall ,ithin the jurisdiction of regular courts. )he fraud committed is detrimental to the interest of the public and, therefore, encompasses a categor& of relationship within the 12C jurisdiction+ Other,ise stated, in order that the SEC can take cogniCance of a case, the contro'ers0 must pertain to an0 of the follo,ing relationships< DaE .et,een the corporation, partnership or association and the pu.lic; D.E .et,een the corporation, partnership or association and its stockholders, partners, mem.ers or officers; DcE .et,een the corporation, partnership or association and the state so far as its franchise, permit or license to operate is concerned; and DdE among the stockholders, partners or associates themsel'es. The de'ices or schemes amounting to fraud and misrepresentation detrimental to the interest of the pu.lic ha'e .een resorted to .0 *remiere Corporation. 8t can not .ut .e conceded, therefore, that the SEC ma0 exercise its adjudicati'e po,ers pursuant to Sec. #DaE of *res. (ecree No. 5!?/ DSupraE. The fact that *remiere@s authorit0 to engage in financing alread0 expired ,ill not ha'e the effect of di'esting the SEC of its original and exclusi'e jurisdiction. The expanded jurisdiction of the SEC ,as concei'ed primaril0 to protect the interest of the in'esting pu.lic. That 9agalad@s mone0 placements ,ere in the nature of in'estments in *remiere can not .e gainsaid. 9agalad had reasona.l0 expected to recei'e returns from mone0s she had paid to *remiere.1eliance .0 9agalad on the cases of (91C '. Este del Sol, D4" SC1/ 5"E and ;nion +lass H Container Corp. '. SEC D47 SC1/ "4E, is misplaced for no,here in the complaints therein is found an0 a'erment of fraud or misrepresentation. 'urther bolstering the jurisdiction of the 12C is the fact that said agenc& had alread& appointed a Rehabilitation Receiver for Premiere and has directed all proceedings or claims against it be suspended+ This, pursuant to Sec. 7DcE of *res. (ecree No. 5!?/ pro'iding that $upon appointment of a . . . reha.ilitation recei'er . . . all actions for claims against corporations . . . under recei'ership pending .efore an0 court, tri.unal, .oard or .od0 shall .e suspended accordingl0.$ )0 so doing, SEC has exercised its original and exclusi'e jurisdiction to hear and decide cases in'ol'ing< aE*etitions of corporations, partnerships or associations to .e declared in the state of suspension of pa0ments A DSection #DdE of *res. (ecree No. 5!?/ as added .0 *res. (ecree 46#:E. T#E COLLECTOR O' INTERNAL RE3ENUE, "s. T#E CLU0 'ILIPINO, INC. $E CE0U&ay /-, -.7+ Facts; This is a petition to re'ie, the decision of the Court of Tax /ppeals, re'ersing the decision of the Collector of 8nternal 1e'enue, assessing against $Clu. Filipino, 8nc. de Ce.u$, the sum of *4,!7:.:3 as fixed and percentage taxes, surcharge and compromise penalt0, allegedl0 due from it as a keeper of .ar and restaurant. $Clu. Filipino, 8nc. de Ce.u,$ DClu., for shortE, is a ci'ic corporation ,ith an original authoriCed capital stock of *,!!!.!!, ,hich ,as su.se2uentl0 increased to *!!,!!!.!!. Neither in the articles or .0?la,s is there a pro'ision relati'e to di'idends although it is co'enanted that upon its dissolution, the Clu.@s remaining assets, after pa0ing de.ts, shall .e donated to a charita.le *hilippine 8nstitution in Ce.u. The Clu. o,ns and operates a clu. house, a .o,ling alle0, a golf course Don a lot leased from the go'ernmentE, and a .ar?restaurant. The .ar?restaurant ,as a necessar0 incident to the operation of the clu. and its golf?course. The clu. is operated mainl0 ,ith funds deri'ed from mem.ership fees and dues. Bhate'er profits it had, ,ere used to defra0 its o'erhead expenses and to impro'e its golf?course. 8n 45#4. as a result of a capital surplus, arising from the re?'aluation of its real properties, the 'alue or price of ,hich increased, the Clu. declared stock di'idends; .ut no actual cash di'idends ,ere distri.uted to the stockholders. 8n 45#, a )81 agent disco'ered that the Clu. has ne'er paid percentage tax on the gross receipts of its .ar and restaurant, although it secured )?3, )?5DaE and )?6 licenses. 8n (ecem.er 45#, the Collector of 8nternal 1e'enue assessed against the Clu., /s percentage tax on its gross receiptsduring the tax 0ears 4537 to 45#4 O4,!!! 8ssues; BON lia.le for percentage taxes prescri.ed in sections 4:, 4:" and 454 of the Tax Code %eld - ratio; No, re'ersed 8t has .een held that the lia.ilit0 for fixed and percentage taxes, as pro'ided .0 these sections, does not ipso facto attach .0 mere reason of the operation of a .ar and restaurant. For the lia.ilit0 to attach, the operator thereof must be engaged in the business as a barkeeper and restaurateur+ The plain and ordinar0 meaning of .usiness is restricted to acti'ities or affairs ,here profit is the purpose or li'elihood is the moti'e, and the term .usiness ,hen used ,ithout 2ualification, should .e construed in its plain and ordinar0 meaning, restricted to acti'ities for profit or li'elihood. The Clu. ,as organiCed to de'elop and culti'ate sports of all class and denomination, for the healthful recreation and entertainment of its stockholders and mem.ers; Ait is operated mainl0 ,ith funds deri'ed from mem.ership fees and dues; the Clu.@s .ar and restaurant catered onl0 to its mem.ers and their guests; Ait stands to reason that the Club is not engaged in the business of an operator of bar and restaurant. The Clu. deri'ed profit from the operation of its .ar and restaurant, .ut such fact does not necessaril0 con'ert it into a profit?making enterprise. )he bar and restaurant are necessar& adjuncts of the Club to foster its purposes and the profits derived therefrom are necessaril& incidental to the primar& object. That a Clu. makes some profit, does not make it a profit?making Clu.. /s has .een remarked a clu. should al,a0s stri'e, ,hene'er possi.le, to ha'e surplus 8t is claimed that unlike the t,o cases just cited DsupraE, ,hich are non?stock, the appellee Clu. is a stock corporation. This is unmeritorious. )he facts that the capital stock of the respondent Club is divided into shares, does not detract from the finding of the trial court that it is not engaged in the business of operator of bar and restaurant. Bhat is determinati'e of ,hether or not the Clu. is engaged in such .usiness is its o.ject or purpose, as stated in its articles and .0?la,s. The actual purpose is not controlled .0 the corporate form or .0 the commercial aspect of the .usiness prosecuted, .ut ma0 .e sho,n .0 extrinsic e'idence, including the .0?la,s and the method of operation. 9oreo'er, for a stock corporation to e0ist, two re/uisites must be complied with, to ,it< D4E a capital stock di'ided into shares and DE an authorit0 to distri.ute to the holders of such shares, di'idends or allotments of the surplus profits on the .asis of the shares held Dsec. ", /ct No. 43#5E. 8n the case at .ar, no,here in its articles of incorporation or .0?la,s could .e found an authorit0 for the distri.ution of its di'idends or surplus profits. Strictl0 speaking, it cannot, therefore, .e considered a stock corporation. &ANUEL R. $ULA1 ENTERPRISES, INC., 3IRGILIO E. $ULA1 AN$ NEPO&UCENO RE$O3AN, "s. T#E #ONORA0LE COURT O' APPEALS, E$GAR$O $. PA0ALAN, &ANUEL A. TORRES, JR., &ARIA T#ERESA 3. 3ELOSO AN$ CASTRENSE C. 3ELOSOA898st +6, -../ Facts; This is a petition for re'ie, on certiorari to annul the decision 4 of the Court of /ppeals affirming the decisionof the 1egional Trial Court of *asa0 ordering (ula0 to surrender and deli'er possession of the su.ject parcel of land. (ula0 Enterprises, 8nc, a domestic corporation ,ith the follo,ing as mem.ers of its )oard< 9anuel 1. (ula0 ,ith 45,57! shares and designated as president, treasurer and general manager, /tt0. Firgilio E. (ula0 ,ith 4! shares and designated as 'ice?president; Pinda E. (ula0 ,ith 4! shares; Celia (ula0?9endoCa ,ith 4! shares; and /tt0. *laridel C. Iose ,ith 4! shares and designated as secretar0, o,ned a propert0 kno,n as (ula0 /partment consisting of sixteen D47E apartment units on a six hundred eight0?nine D7:5E s2uare meters lot, more or less, located at *asa0 Cit0. On (ecem.er ", 4567, 9anuel (ula0 .0 'irtue of )oard 1esolution sold the su.ject propert0 to spouses Feloso in the amount of *"!!,!!!.!!. Su.se2uentl0, 9anuel (ula0 and spouses Feloso executed a 9emorandum to the (eed of /.solute Sale of (ecem.er ", 4567 dated (ecem.er 5, 4566 gi'ing 9anuel (ula0 ,ithin DE 0ears or until (ecem.er 5, 4565 to repurchase the su.ject propert0 for *!!,!!!.!! ,hich ,as not annotated. On (ecem.er 3, 4567, Feloso, ,ithout the kno,ledge of 9anuel (ula0, mortgaged the su.ject propert0 to 9anuel /. Torres for a loan of *#!,!!!.!! ,hich ,as dul0 annotated. ;pon the failure of pri'ate respondent 9aria Feloso to pa0, the su.ject propert0 ,as sold on /pril #, 456: to pri'ate respondent Torres as the highest .idder in an extrajudicial foreclosure sale. On Iul0 !, 456:, Feloso executed a (eed of /.solute /ssignment of the 1ight to 1edeem in fa'or of (ula0 assigning her right to repurchase from Torres as a result of the extra sale held on /pril #, 456:. /s neither Feloso nor (ula0 ,as a.le to redeem, Torres filed an /ffida'it of Consolidation of O,nership. Torres filed an action against petitioner corporation, Firgilio (ula0 and Nepomuceno 1edo'an, a tenant for the reco'er0 of possession. The trial court rendered a decision in fa'or of pri'ate respondents ,-c the C/ affirmed. 8ssue; BON sale .inding against the corporation (ula0 8nc %eld - ratio; Kes, affirmed (uring the pendenc0 of this petition, Torres died and named Torres?*a.alan 1ealt0 H (e'elopment Corporation as his heir in his holographic ,ill. *etitioners contend that the court erred ,hen it applied the doctrine of piercing the 'eil of corporate entit0 considering that the sale has no .inding effect on petitioner corporation as )oard 1esolution No. 4: ,as resol'ed ,ithout the appro'al of all the mem.ers of the .oard and 1esolution ,as not prepared .0 its secretar0. Section 4!4 of the Corporation Code of the *hilippines pro'ides< Sec. 4!4. Bhen .oard meeting is unnecessar0 or improperl0 held. ;nless the .0?la,s pro'ide other,ise, an0 action .0 the directors of a close corporation ,ithout a meeting shall ne'ertheless .e deemed 'alid if< 4. )efore or after such action is taken, ,ritten consent thereto is signed .0 all the directors, or . /ll the stockholders ha'e actual or implied kno,ledge of the action and make no prompt o.jection thereto in ,riting; or ". The directors are accustomed to take informal action ,ith the express or implied ac2uiese of all the stockholders, or 5+ $ll the directors have e0press or implied knowledge of the action in /uestion and none of them makes prompt objection thereto in writing+ 8f a directors@ meeting is held ,ithout call or notice, an action taken therein ,ithin the corporate po,ers is deemed ratified .0 a director ,ho failed to attend, unless he promptl0 files his ,ritten o.jection ,ith the secretar0 of the corporation after ha'ing kno,ledge thereof. *etitioner corporation is classified as a close corporation and conse2uentl0 a .oard resolution authoriCing the sale is not necessar0 to .ind the corporation for the action of its president. Corporate action taken at a board meeting without proper call or notice in a close corporation is deemed ratified b& the absent director unless the latter promptl& files his written objection with the secretar& of the corporation after having knowledge of the meeting which, in his case, petitioner 6irgilio Dula& failed to do+ /lthough a corporation is an entit0 ,hich has a personalit0 distinct and separate from its indi'idual stockholders or mem.ers, the veil of corporate fiction ma& be pierced when it is used to defeat public convenience justif& wrong, protect fraud or defend crime. The pri'ilege of .eing treated as an entit0 distinct and separate from its stockholder or mem.ers is therefore confined to its legitimate uses and is su.ject to certain limitations to pre'ent the commission of fraud or other illegal or unfair act. 7hen the corporation is used merel& as an alter ego or business conduit of a person, the law will regard the corporation as the act of that person. The Supreme Court had repeatedl0 disregarded the separate personalit0 of the corporation ,here the corporate entit0 ,as used to annul a 'alid contract executed .0 one of its mem.ers. *etitioners@ claim that the sale is null and 'oid as the alleged )oard 1esolution No. 4: ,as passed ,ithout the kno,ledge and consent of the other mem.ers cannot .e sustained. (ula0@s protestations of complete innocence is difficult to .elie'e. %e is 'er0 much pri'0 to the transactions. %e is a incorporator and one of the .oard of directors. 8n ordinar0 parlance, the said entit0 is loosel0 referred to as a $famil0 corporation$. )he nomenclature, if imprecise, however, fairl& reflects the cohesiveness of a group and the parochial instincts of the individual members of such an aggrupation of ,hich 9anuel 1. (ula0 Enterprises, 8nc. is t0pical< four?fifths of its incorporators .eing close relati'es namel0, three D"E children and their father ,hose name identifies their corporation. )esides, Firgilio (ula0 executed an affida'it that he ,as a signator0 ,itness to the execution of the (eed of /.solute Sale ,-c indicates that he ,as a,are of the transaction. Conse2uentl0, petitioner corporation is lia.le for the act of 9anuel (ula0 and the sale of the su.ject propert0 to pri'ate respondents .0 9anuel (ula0 is 'alid and .inding. /s stated .0 the trial court< . . . the sale A,as a corporate act A. This is so .ecause 9anuel 1. (ula0 ,as not onl0 president and treasurer .ut also the general manager of the corporation. The corporation ,as a closed famil0 corporation and the onl0 non?relati'e in the .oard of directors ,as /tt0. *laridel C. Iose ,ho appeared on paper as the secretar0. A8t cannot .e concealed that 9anuel 1. (ula0 as president, treasurer and general manager almost had a.solute control o'er the .usiness and affairs of the corporation. NATIONAL $E3ELOP&ENT CO&PAN1 AN$ NE: AGRI%, INC., "s. P#ILIPPINE 3ETERANS 0AN4, T#E E%;O''ICIO S#ERI'' and GO$O'RE$O 5UILING, in his capacity as $ep8ty Sheri o Ca!a)*a $ece)*er -c as denied in ,-HH% Armed ith this 1esolution, petitioner rote all the educational institutions it could find using the ord !$yceum! as part of their corporate name, and advised them to discontinue such use% Soon, petitioner filed a complaint (efore the SEC% 7he SEC sustained petitioner's claim% 7he SEC En +anc reversed% #t did not consider the ord !$yceum! to have (ecome so identified ith petitioner as to render use thereof (y other institutions as productive of confusion a(out the identity of the schools concerned in the mind of the general pu(lic% 7he SEC En +anc held that the attaching of geographical names to the ord !$yceum! served sufficiently to distinguish the schools% 7he Court of Appeals affirmed the SEC En +anc% #ssue; ;4' ratio; ?es, affirmed in toto Petitioners argue that they are legally @ustified to ithhold their amorti&ed payments until such time they ould have (een properly notified of the change in the corporate name% 7heir defense that they should first (e formally notified presupposes that there exists a re8uirement ordering a (an) that changes its corporate name to formally notify all its de(tors%7here is no such requirement% *oreover evidence a(ound that they had notice or )noledge thereof%First, in letter signed by #ccountant of petitioner corporation, addressed to PA#C Savings%Part of said letter readsA ratio; Section ,- reads as follosA % % % 7he due incorporation of any corporations claiming in good faith to (e a corporation under this Act and its right to exercise corporate poers shall not (e in8uired into collaterally in any private suit to hich the corporation may (e a party, (ut such in8uiry may (e had at the suit of the #nsular 0overnment on information of the Attorney:0eneral% 7here are to reasons hy this section does not govern% 'ot having o(tained the certificate of incorporation, the Far Eastern $um(er and Commercial Co% J even its stoc)holders J may not pro(a(ly claim !in good faith! to (e a corporation% 9nder our statue CCorporation $a, sec% ,,D it is the issuance of a certificate of incorporation which calls a corporation into being% 7he immunity if collateral attac) is granted to corporations !claiming in good faith to (e a corporation under this act%! &uch a claim is compatible with the existence of errors and irregularities+ but not with a total or substantial disregard of the law% 9nless there has (een an evident attempt to comply ith the la the claim to (e a corporation !under this act! could not (e made !in good faith%! Second, this is not a suit in hich the corporation is a party% 7his is a litigation (eteen stoc)holders of the alleged corporation, for the purpose of o(taining its dissolution% ,ven the existence of a de *ure corporation may be terminated in a private suit for its dissolution between stockholders, without the intervention of the state" 7here might (e room for argument on the right of minority stoc)holders to sue for dissolution (ut that 8uestion does not affect the court's @urisdiction, and is a matter for decision (y the @udge, su(@ect to revie on appeal% ;hich (rings us to one principal reason hy this petition may not prosper, namelyA the petitioners have their remedy by appealing the order of dissolution at the proper time" ASIA BAN-ING CORPORATION, vs. STANDARD PRODUCTS, CO., INCSe95e8be $$, $%#: Facts; 7his action is to recover the sum of P35,HF/%5H, the (alance due on the a promissory noteA Be promise to pay to the Asia +an)ing Corporation, or order, the sum of thirty:seven thousand seven hundred fifty:seven and 33>,GG pesos B 7"E S7A'DA1D P14D9C7S C4%, #'C% +y CSgd%D 0E410E "% SEA6E1 +y President 7he court (elo favored plaintiff% At the trial, plaintiff failed to prove the corporate existence of the parties and the appellant insists that under these circumstances the court erred in finding that the parties ere corporations ith @uridical personality% #ssue; ;4' parties may sue > (e sued "eld > ratio; ?es, affirmed 7he general rule is that in the absence of fraud, a person who has contracted or otherwise dealt with an association in such a way as to recognize and in effect admit its legal existence as a corporate body is thereby estopped to deny its corporate existence in any action leading out of or involving such contract or dealing, unless its existence is attacked for cause which have arisen since making the contract or other dealing relied on as an estoppel and this applies to foreign as well as to domestic corporations% 7he defendant having recogni&ed the corporate existence of the plaintiff (y ma)ing a promissory note in its favor and ma)ing partial payments on the same is therefore estopped to deny said plaintiff's corporate existence% #t is also estopped from denying its on corporate existence% #t is unnecessary for the plaintiff to present evidence of the corporate existence of either% CRANSON v. I.B.M. CORP. A96; +/, $%1: Facts; 4n the theory that the 1eal Estate Service +ureau as neither a de @ure nor a de facto corporation and that Al(ion C% Cranson, Kr%, as a partner in the (usiness conducted (y the +ureau and as such as personally lia(le for its de(ts, the #nternational +usiness *achines Corporation (rought this action against Cranson for the (alance due on electric typeriters purchased (y the +ureau% Cranson asserted that the +ureau as a de facto corporation and that he as not personally lia(le for its de(ts% #n April ,-/,, Cranson as as)ed to invest in a ne (usiness corporation% "e met ith other interested individuals and agreed to purchase stoc) and (ecome an officer and director% 7hereafter, he paid for and received a stoc) certificate evidencing onership of shares% 7he (usiness of the ne venture as conducted as if it ere a corporation, through corporate (an) accounts, ith auditors maintaining corporate (oo)s and under a lease for the office% Cranson as elected president% At no time did he assume any personal o(ligation or pledge his individual credit to #%+%*% Due to an oversight on the part of the attorney, of hich Cranson as not aare, the certificate of incorporation, hich had (een signed prior to *ay ,-/,, as not filed until 'ovem(er ,-/,% +eteen *ay and 'ovem(er 2, the +ureau purchased eight typeriters from #%+%*%, on account of hich partial payments ere made, leaving a (alance of P5,FFF%5G% #ssue; ;4' Cranson may (e held lia(le "eld > ratio; 'o, doctrine of estoppel applies 7o doctrines have (een used (y the courts to clothe an officer of a defectively incorporated association ith the corporate attri(ute of limited lia(ility% 7he first, often referred to as the doctrine of de facto corporations, has (een applied in those cases here there are elements shoingAC,D the existence of la authori&ing incorporationAC3D an effort in good faith to incorporate under the existing la; andCFD actual user or exercise of corporate poers 7he second, the doctrine of estoppel to deny the corporate existence, is generally employed here the person see)ing to hold the officer personally lia(le has contracted or otherise dealt ith the association in such a manner as to recogni&e and in effect admit its existence as a corporate (ody% #t is not at all clear hat *aryland has done ith respect to the to doctrines% 7here have (een no recent cases in this State on the su(@ect and some of the seemingly irreconcila(le earlier cases offer little to clarify the pro(lem% ;hen summari&ed, the la in *aryland pertaining to the de facto and estoppel doctrines reveals that the cases seem to fall into one or the other of to categories% #n one line of cases, the Court, refused to recogni&e (oth doctrines here there had (een a failure to comply ith a condition precedent to corporate existence, (ut, henever such noncompliance concerned a condition su(se8uent to incorporation, the Court often applied the estoppel doctrine% #n the other line of cases, the Court, emphasi&ed the course of conduct (eteen the parties and applied the estoppel doctrine hen there had (een su(stantial dealings (eteen them on a corporate (asis% 7here is a ide difference (eteen creating a corporation (y means of the de facto doctrine and estopping a party% here there is a concurrence of the three elements necessary for the application of the de facto corporation doctrine, there exists an entity which is a corporation de *ure against all persons but the state% 4n the other hand, the estoppel theory is applied only to the facts of each particular case and may be invoked even where there is no corporation de facto% #%+%*% contends that the failure of the +ureau to file its certificate of incorporation (arred all corporate existence% +ut, e thin) that #%+%*% having dealt ith the +ureau as if it ere a corporation and relied on its credit rather than that of Cranson, is estopped to assert that the +ureau as not incorporated% !7he doctrine in relation to estoppel is (ased upon the ground that it ould generally be inequitable to permit the corporate existence of an association to be denied by persons who have represented it to be a corporation, or held it out as a corporation, or (y any persons ho have recogni&ed it as a corporation (y dealing ith it as such; and (y the overhelming eight of authority, therefore, a person may (e estopped to deny the legal incorporation of an association hich is not even a corporation de facto% MANUELA T. VDA. DE SALVATIERRA, vs. HON. LOREN.O C. GARLITOS, 6n )6s (a9a(65" as ,!d2e 34 5)e C3!5 34 F6s5 Ins5an(e, and SEGUNDINO REFUER.OMa" #+, $%*0 Facts; 7his is a petition to nullify the order of the Court of First #nstance relieving 1efuer&o of lia(ility for the contract entered into (eteen the former and the Philippine Fi(ers Producers Co%, #nc%, of hich 1efuer&o is the president% Salvatierra ons a parcel of land located in $eyte% 4n *arch ,-.5, she entered into a ,G year lease ith the Philippine Fi(ers Producers Co%, #nc%, represented (y 1efuer&o, the President!% 7he land ould (e planted to )enaf, ramie or other crops; that the lessor ould (e entitled to FG per cent of the net income; and that after every harvest, the lessee as to declare at the earliest possi(le time the income and to deliver the corresponding share due the lessor% 7he o(ligations imposed ere not complied hence Salvatierra filed ith the CF# a complaint against the Philippine Fi(ers Producers Co%, #nc%, and 1efuer&o, for accounting, rescission and damages% 7he loer Court rendered @udgment granting plaintiff's prayer% 'o appeal perfected ithin the reglementary period, the Court, issued a rit of execution, in virtue of hich the Provincial Sheriff of $eyte caused the attachment of F parcels of land registered in the name of Segundino 1efuer&o% 'o property of the Philippine Fi(ers Producers Co%, #nc%, as found availa(le for attachment% 4n Kanuary ,-./, 1efuer&o filed a motion claiming that the decision as null ith respect to him, there (eing no allegation in the complaint pointing to his personal lia(ility and thus prayed that an order (e issued limiting such lia(ility to defendant corporation% 7he Court granted the same and ordered the Provincial Sheriff to release all properties (elonging to the movant% #ssue; ;4' 1efuer&o lia(le "eld > ratio; ?es, reversed 7he order sought to (e nullified as issued pursuant to 1ule F2 of the 1ules of Court% Section F of said 1ule in providing for the period ithin hich such a motion may (e filed, prescri(es thatA SEC% F%;"E' PE7#7#4' F#$ED; C4'7E'7S A'D 6E1#F#CA7#4'% J A petition Bmust (e verified, filed ithin sixty days after the petitioner learns of the @udgment, order, or other proceeding to (e set aside, and not more than six months after such @udgment or order as entered, or such proceeding as ta)en; B 7he afore8uoted provision treats of 3 periods, i%e%, /G days after petitioner learns of the @udgment, and not more than / months after the @udgment or order as rendered, (oth of hich must (e satisfied% As the decision in the case at (ar as date of Kune 2, ,-.., hereas the motion as dated Kanuary F,, ,-./, or after the lapse of H months and 3F days, the filing of the motion as (eyond the prescriptive period% 7he remedy alloed (y 1ule F2 to a party adversely affected (y a decision is certainly an alert of grace or (enevolence intended to afford said litigant a penultimate opportunity to protect his interest% (onsidering the nature of such relief and the purpose behind it, the periods fixed by said rule are non-extendible and never interrupted+ nor could it be sub*ected to any condition or contingency because it is of itself devised to meet a condition or contingency% 1efuer&o interposed the defense that the complaint contained no allegation hich ould hold him lia(le personally% Plaintiff refute this averment (y contending that her failure to specify defendant's personal lia(ility as due to the fact that all the time she as under the impression that the Philippine Fi(ers Producers Co%, #nc%, as a duly registered corporation (ut a su(se8uent in8uiry from the SEC yielded otherise% ;hile as a general rule a person ho has contracted or dealt ith an association in such a ay as to recogni&e its existence as a corporate (ody is estopped from denying the same in an action arising out of such transaction or dealing, yet this doctrine may not be held to be applicable where fraud takes a part in the said transaction% #n the instant case, on plaintiff's charge that she as unaare of the fact that the Philippine Fi(ers Producers Co%, #nc%, had no @uridical personality, 1efuer&o gave no confirmation or denial and the circumstances surrounding the execution of the contract lead to the inescapa(le conclusion that Salvatierra as really made to (elieve that such corporation as duly organi&ed% 7here can (e no 8uestion that a corporation ith registered has a @uridical personality separate and distinct from its component mem(ers or stoc)holders and officers such that a corporation cannot (e held lia(le for the personal inde(tedness of a stoc)holder even if he should (e its president and conversely, a stoc)holder or mem(er cannot (e held personally lia(le for any financial o(ligation (e, the corporation in excess of his unpaid su(scription% +ut this rule is understood to refer merely to registered corporations and cannot (e made applica(le to the lia(ility of mem(ers of an unincorporated association% 7he reason (ehind this doctrine is o(vious:since an organi&ation hich (efore the la is non:existent has no personality and ould (e incompetent to act and appropriate for itself the poers and attri(ute of a corporation as provided (y la; it cannot create agents or confer authority on another to act in its (ehalf; thus, those ho act or purport to act as its representatives or agents do so ithout authority and at their on ris)% A person ho acts as an agent ithout authority or ithout a principal is himself regarded as the principal, possessed of all the rights and su(@ect to all the lia(ilities of a principal, a person acting or purporting to act on (ehalf of a corporation hich has no valid existence assumes such privileges and o(ligations and comes personally lia(le for contracts entered into or for other acts performed as such, agent% Considering that 1efuer&o, as president of the unregistered corporation as the moving spirit (ehind the consummation of the lease agreement (y acting as its representative, his lia(ility cannot (e limited or restricted that imposed upon corporate shareholders% #n acting on (ehalf of a corporation hich he )ne to (e unregistered, he assumed the ris) of reaping the conse8uential damages% RE&NALDO M. LO.ANO, vs. HON. ELIE.ER R. DE LOS SANTOS, Pes6d6n2 ,!d2e, and ANTONIO ANDA ,!ne $%, $%%< Facts; 7his petition is to annul the decision of the 1egional 7rial Court hich ordered the *unicipal Circuit 7rial Court to dismiss Civil Case for lac) of @urisdiction% +oth ere presidents of their respective Keepney 4perators' and Drivers' Association, #nc%; in August ,--., petitioner and private respondent agreed to consolidate their respective associations and form the 9nified *a(alacat:Angeles Keepney 4perators' and Drivers Association, #nc% C9*AK4DAD; they also agreed to elect one set of officers ho shall (e given the sole authority to collect the daily dues; elections ere held on 4cto(er ,--. and (oth ran for president; petitioner on private respondent protested and, alleging fraud, refused to recogni&e the results of the election; private respondent also refused to a(ide (y their agreement and continued collecting the dues from the mem(ers of his association% Petitioner as thus constrained to file the complaint to restrain private respondent% 1espondent claimed that @urisdiction as lodged ith the SEC% #ssue; ;4' SEC has @uris "eld > ratio; 'one, granted 7he @urisdiction of the SECD is set forth in Section . of Presidential Decree 'o% -G3:AA Sec% .% % % % N7Ihe Securities and Exchange Commission NhasI original and exclusive @urisdiction to hear and decide cases involvingA CaD Devices or schemes employed (y or any acts of the (oard of directors, (usiness associates, its officers or partners, amounting to fraud and misrepresentation hich may (e detrimental to the interest of the pu(lic and>or of the stoc)holders, partners, mem(ers of associations or organi&ations registered ith the Commission% C(D Controversies arising out of intracorporate or partnership relations, (eteen and among stoc)holders, mem(ers or associates; (eteen any or all of them and the corporation, partnership or association of hich they are stoc)holders, mem(ers, or associates, respectively; and (eteen such corporation, partnership or association and the state insofar as it concerns their individual franchise or right to exist as such entity% CcD Controversies in the election or appointment of directors, trustees, officers or managers of such corporations, partnerships or associations% CdD Petitions of corporations, partnerships or associations to (e declared in the state of suspension of payments in cases here the corporation, partnership or association possesses sufficient property to cover all its de(ts (ut foresees the impossi(ility of meeting them hen they respectively fall due or in cases here the corporation, partnership or association has no sufficient assets to over its lia(ilities, (ut is under the management of a 1eha(ilitation 1eceiver or *anagement Committee created pursuant to this Decree% 7his @urisdiction is determined (y a concurrence of to elementsA C,D the status or relationship of the parties; and C3D the nature of the 8uestion that is the su(@ect of their controversy% 7he first element re8uires that the controversy must arise out of intracorporate or partnership relations (eteen and among stoc)holders, mem(ers, or associates; (eteen any or all of them and the corporation, partnership or association of hich they are stoc)holders, mem(ers or associates, respectively; and (eteen such corporation, partnership or association and the State in so far as it concerns their individual franchises% 7he second element re8uires that the dispute among the parties (e intrinsically connected ith the regulation of the corporation, partnership or association or deal ith the internal affairs of the corporation, partnership or association%After all, the principal function of the SEC is the supervision and control of corporations, partnership and associations ith the end in vie that investments in these entities may (e encouraged and protected% 7here is no intracorporate nor partnership relation (eteen petitioner and private respondent% 7he controversy (eteen them arose out of their plan to consolidate their respective associations% 7his unified association asstill a proposal% #t had not (een approved (y the SEC% Consolidation (ecomes effective not upon mere agreement of the mem(ers (ut only upon issuance of the certificate of consolidation (y the SEC% 7he dispute is (eteen mem(ers of separate and distinct associations% Petitioner and private respondent have no intracorporate relation much less do they have an intracorporate dispute% 7he SEC therefore has no @urisdiction over the complaint% 7he doctrine of corporation (y estoppel(y respondent cannot override @urisdictional re8uirements% Kurisdiction is fixed (y la and is not su(@ect to the agreement of the parties% #t cannot (e ac8uired through or aived, enlarged or diminished (y, any act or omission of the parties, neither can it (e conferred (y the ac8uiescence of the court%Corporation (y estoppel is founded on principles of e8uity and is designed to prevent in@ustice and unfairness% ;here there is no third person involved and the conflict arises only among those assuming the form of a corporation, ho therefore )no that it has not (een registered, there is no corporation (y estoppel% LIM TONG LIM, vs. PHILIPPINE FISHING GEAR INDUSTRIES, INCN3ve8be +, $%%% Facts; A partnership may (e deemed to exist among parties ho agree to (orro money to pursue a (usiness and to divide the profits or losses that may arise therefrom, even if it is shon that they have not contri(uted any capital of their on to a !common fund%! +eing partner, they are all lia(le for de(ts incurred (y or on (ehalf of the partnership% 7he lia(ility for a contract entered into on (ehalf of an unincorporated association or ostensi(le corporation may lie in a person ho may not have directly transacted on its (ehalf, (ut reaped (enefits from that contract% #n the Petition, $im 7ong $im assails the the Court of Appeals >c affirmed the 17C finding $im et al lia(le to PF0# 4n (ehalf of !4cean Ouest Fishing Corporation,! Antonio Chua and Peter ?ao entered into a Contract for the purchase of fishing nets from the Philippine Fishing 0ear #ndustries, #nc%% 7hey claimed that they ere engaged in a (usiness venture ith $im 7ong $im% 7he total price is P.F3,G5. 7he (uyers failed to pay hence, private respondents filed a collection suit against Chua, ?ao and Petitioner $im 7ong $im% 7he suit as (rought in their capacities as general partners, on the allegation that !4cean Ouest Fishing Corporation! as a nonexistent corporation as shon (y a Certification from the SEC% 7he trial court ruled that Philippine Fishing 0ear #ndustries as entitled to the ;rit of Attachment and that Chua, ?ao and $im, as general partners, ere @ointly lia(le to pay respondent% CA affirmed% #ssue; ;4' $im lia(le "eld > ratio; ?es, denied, affirmed 7he Court must resolve this )ey issueA hether (y their acts, $im, Chua and ?ao could (e deemed to have entered into a partnership% First and Second #ssuesA Existence of a Partnership and Petitioner's $ia(ility Petitioner disclaims any direct participation in the purchase, and that he has not even met the representatives of the respondent company% Petitioner further argues that he as a lessor, not a partner, of Chua and ?ao, for the !Contract of $ease !, shoed that he had merely leased to the to the main asset of the purported partnership J the fishing (oat F>+ $ourdes% ;e are not persuaded% Article ,H/H of the Civil Code providesA Art% ,H/H J +y the contract of partnership, to or more persons (ind themselves to contri(ute money, property, or industry to a common fund, ith the intention of dividing the profits among themselves% +oth loer courts ruled that a partnership existed (ased on the folloing C,D $im re8uested ?ao ho as engaged in commercial fishing to @oin him, hile Antonio Chua as already ?ao's partner; C3D after convening for a fe times, $im, Chua, and ?ao ver(ally agreed to ac8uire to fishing (oats CFD they (orroed PF%3. million from Kesus $im, (rother of $im, to finance the venture% C5D they (ought the (oats from C*F Fishing Corporation; C.D 7hat $im, Chua and ?ao agreed that the refur(ishing, re:e8uipping, repairing, dry doc)ing and other expenses for the (oats ould (e shouldered (y Chua and ?ao; C/D (ecause of the !unavaila(ility of funds,! Kesus $im again extended a loan CHD #n pursuance of the (usiness agreement, ?ao and Chua (ought nets from 1espondent 2D su(se8uently, Civil Case as filed (y Chua and ?ao against $im for CaD declaration of nullity of commercial documents; C(D reformation of contracts;C-D 7hat the case as amica(ly settled through a Compromise Agreement #n their Compromise Agreement, they revealed their intention to pay the loan ith the proceeds of the sale of the (oats, and to divide e8ually among them the excess or loss% 7hese (oats, the purchase and the repair of hich ere financed ith (orroed money, fell under the term !common fund! under Article ,H/H% 7he contri(ution to such fund need not (e cash or fixed assets; it could (e an intangi(le li)e credit or industry% #t is clear that there as a partnership% Petitioner ;as a Partner, 'ot a $essor ;e are not convinced% "is allegation defies logic% #n effect, he ould li)e this Court to (elieve that he consented to the sale of his on (oats to pay a de(t of Chua and ?ao, ith the excess of the proceeds to (e divided among the three of them% #ndeed, his consent to the sale proved that there as a preexisting partnership among all three% Corporation (y Estoppel Petitioner argues that under the doctrine of corporation (y estoppel, lia(ility can (e imputed only to Chua and ?ao% ;e disagree% Sec% 3, of the Corporation Code of the Philippines providesA Sec% 3,%Corporation (y estoppel% J All persons ho assume to act as a corporation )noing it to (e ithout authority to do so shall (e lia(le as general partners for all de(ts, lia(ilities and damages incurred or arising as a result thereofA Provided hoever, 7hat hen any such ostensi(le corporation is sued on any transaction entered (y it as a corporation or on any tort committed (y it as such, it shall not (e alloed to use as a defense its lac) of corporate personality% 4ne ho assumes an o(ligation to an ostensi(le corporation as such, cannot resist performance thereof on the ground that there as in fact no corporation% Even if the ostensi(le corporate entity is proven to (e legally nonexistent, a party may (e estopped from denying its corporate existence% !An unincorporated association has no personality and ould (e incompetent to act; it cannot create agents; thus, those ho act or purport to act as its representatives do so ithout authority and at their on ris)% #t is an elementary principle of la that a person ho acts as an agent ithout authority is himself regarded as the principal, a person acting or purporting to act on (ehalf of a corporation hich has no valid existence assumes such privileges and o(ligations and (ecomes personally lia(le% 7he doctrine of corporation (y estoppel may apply to the alleged corporation and to a third party% #n the first instance, an unincorporated association, hich represented itself to (e a corporation, ill (e estopped from denying its corporate capacity in a suit against it (y a third person ho relied in good faith on such representation% #t cannot allege lac) of personality to (e sued to evade its responsi(ility for a contract it entered into and (y virtue of hich it received advantages and (enefits% 4n the other hand, a third party ho, )noing an association to (e unincorporated, nonetheless treated it as a corporation and received (enefits from it, may (e (arred from denying its corporate existence in a suit (rought against the alleged corporation% #n such case, all those ho (enefited from the transaction made (y the ostensi(le corporation, despite )noledge of its legal defects, may (e held lia(le for contracts they impliedly assented to or too) advantage of% 7he only 8uestion here is hether petitioner should (e held @ointly lia(le% Petitioner contests such lia(ility, insisting that only those ho dealt in the name of the ostensi(le corporation should (e held lia(le% 9n8uestiona(ly, petitioner (enefited from the use of the nets% Clearly, under the la on estoppel, those acting on (ehalf of a corporation and those (enefited (y it, )noing it to (e ithout valid existence, are held lia(le as general partners% 7echnically, it is true that petitioner did not directly act on (ehalf of the corporation% "oever, having reaped the (enefits of he is deemed to (e part of said association and is covered (y the scope of the doctrine of corporation (y estoppel% 7echnicality, hen it deserts its proper office as an aid to @ustice and (ecomes its great hindrance and chief enemy, deserves scant consideration from courts% 7here should (e no vested rights in technicalities% INTERNATIONAL EXPRESS TRAVEL & TOUR SERVICES, INC., , vs. HON. COURT OF APPEALS, HENRI -AHN, PHILIPPINE FOOTBALL FEDERATION,O(53be $%, #/// Facts; 4n Kune ,-2-, #nternational Express 7ravel and 7our Services, #nc%, rote a letter to the Philippine Foot(all Federation through its president "enri Mahn, offering its services as a travel agency% 7he offer as accepted% Petitioner secured the airline tic)ets for the trips of the athletes and officials of the Federation to Muala $umpur, China and +ris(ane% 7he total cost amounted to P55-,/.5%2F% 7he Federation made to partial payments, in the total amount of P,H/,5/H%.G% 4n 4cto(er ,-2-, petitioner rote the Federation, re8uesting for the amount of P3/.,2-5%FF% 4n 4cto(er ,-2-, the Federation, paid the amount of PF,,/GF%GG% 3H Decem(er ,-2-, "enri Mahn issued a personal chec) in the amount of P.G,GGG% 7hereafter, no further payments ere made% 7his prompted petitioner to file a civil case% Petitioner sued "enri Mahn in his personal capacity and as President and impleaded the Federation as an alternative defendant% "enri Mahn averred that the petitioner has no cause of action against him either in his personal capacity or in his official capacity as president% "e maintained that he did not guarantee payment (ut merely acted as an agent of the Federation% 7he trial court favored petitioner and declared "enri Mahn personally lia(le% "enri Mahn ould have (een correct in his contentions had it (een duly esta(lished that defendant Federation is a corporation% 7he trou(le, hoever, is that neither the plaintiff nor the defendant "enri Mahn has adduced any evidence proving the corporate existence of the defendant Federation% B A voluntary unincorporated association, has no poer to enter into, or to ratify, a contract% 7he contract entered into (y its officers or agents on (ehalf of such association is not (inding on, or enforcea(le against it% 7he officers or agents are themselves personally lia(le% CA reversed% #ssue; ;4' Mahn lia(le "eld > ratio; 7he resolution of the case at (ar hinges on the determination of the existence of the Philippine Foot(all Federation as a @uridical person% 7he appellate court recogni&ed the existence of the Federation% #n support of this, the CA cited 1epu(lic Act F,F., the 1evised Charter of the Philippine Amateur Athletic Federation, and Presidential Decree 'o% /G5% +oth 1%A% F,F. and P%D% 'o% /G5 recogni&ed the @uridical existence of national sports associations% Section ,5 of 1%A% F,F. providesA SEC% ,5% Functions, poers and duties of Associations% : 7he 'ational Sports' Association shall have the folloing functions, poers and dutiesA ,% 7o adopt a constitution and (y:las for their internal organi&ation and government; 3% 7o raise funds (y donations, (enefits, and other means for their purposes% F% 7o purchase, sell, lease or otherise encum(er property (oth real and personal, for the accomplishment of their purpose; 5% 7o affiliate ith international or regional sports' Associations after due consultation ith the executive committee; +efore a corporation may ac8uire @uridical personality, the State must give its consent either in the form of a special la or a general ena(ling act% ;e cannot agree ith the vie of the appellate court and the private respondent that the Philippine Foot(all Federation came into existence upon the passage of these las% 'ohere can it (e found in 1%A% F,F. or P%D% /G5 any provision creating the Philippine Foot(all Federation% 7hese las merely recogni&ed the existence of national sports associations and provided the manner (y hich these entities may ac8uire @uridical personality% 7hese las re8uire that (efore an entity may (e considered as a national sports association, such entity must (e recogni&ed (y the accrediting organi&ation, the Philippine Amateur Athletic Federation under 1%A% F,F., and the Department of ?outh and Sports Development under P%D% /G5% 7his fact of recognition, hoever, "enri Mahn failed to su(stantiate% Accordingly, e rule that the Philippine Foot(all Federation is not a national sports association ithin the purvie of the aforementioned las and does not have corporate existence of its on% #t follos that Mahn should (e held lia(le% Any person acting or purporting to act on (ehalf of a corporation hich has no valid existence assumes such privileges and (ecomes personally lia(le for contract entered into or for other acts performed as such agent% As president, "enri Mahn is presumed to have )non a(out the corporate existence or non:existence of the Federation% ;e cannot su(scri(e to the position ta)en (y the appellate court of applying the doctrine of corporation (y estoppel% 7he application of the doctrine applies to a third party only hen he tries to escape lia(ility on a contract from hich he has (enefited on the irrelevant ground of defective incorporation% #n the case at (ar, the petitioner is not trying to escape lia(ility from the contract (ut rather is the one claiming from the contract% LO&OLA GRAND VILLAS HOMEO7NERS =SOUTH> ASSOCIATION, INC., vs. HON. COURT OF APPEALS, HOME INSURANCE AND GUARANT& CORPORATION, EMDEN ENCARNACION and HORATIO A&CARDOA!2!s5 oth buildin$ &ere purchased for ,1,G00,000, but as the corporation had onl' ,1,0@+,000, the balance of the purchase price &as obtained as loans from the !nsular 3ife 8ssurance 0o., 3td. and the ,hilippine Guarant' 0o., !nc. Of the incorporators of the =arvel >uildin$ 0orporation, =a"imo 0ristobal and 8ntonio 0ristobal are half:brothers of =aria >. 0astro, =aria 0ristobal is a half:sister, and Se$undo As$uerra, Sr. a brother:in:la&, husband of =aria 0ristobal, =aria >. 0astro9s half:sister. !t does not appear that the stockholders or the board of directors of the =arvel >uildin$ 0orporation have ever held a business meetin$. %he b':la&s of the corporation, if an' had ever been approved, has not been presented. 4either does it appear that an' report of the affairs of the corporation has been made, either of its transactions or accounts. %he Secretar' of Finance, upon consideration of the report of a special committee assi$ned to stud' the &ar profits ta" case of =rs. =aria >. 0astro, recommended the collection of ,*,+9*,9+0..G as &ar profits ta"es. ,ursuant thereto various properties &ere seied b' the 0ollector of !nternal (evenue on October *1, 19+0. On 4ovember 19+0, the ori$inal complaint in this case &as filed. 8fter trial, the 0ourt of First !nstance of =anila rendered /ud$ment orderin$ the release of the properties mentioned, and en/oined the 0ollector of !nternal (evenue from sellin$ the same. %he 0ollector of !nternal (evenue has appealed to this 0ourt a$ainst the /ud$ment. . 0astro is the true and sole o&ner of all the subscribed stock of the =arvel >uildin$ 0orporation, includin$ those appearin$ to have been subscribed and paid for b' the other members, and conse#uentl' said =aria >. 0astro is also the true and e"clusive o&ner of the properties seied !ssue; !s =aria >. 0astro the o&ner of all the shares of stocks of =arvel >uildin$ 0orporation and the other stockholders mere dummies of hersM 6eld 7 ratio; Ies, reversed !n $eneral the evidence offered b' the plaintiffs is testimonial and direct evidence, eas' of fabrication; that offered b' defendant, documentar' and circumstantial, not onl' difficult of fabrication but in most cases found in the possession of plaintiffs. %here is ver' little room for choice as bet&een the t&o. %he circumstantial evidence is not onl' convincin$; it is conclusive. %he e"istence of endorsed certificates, discovered b' the internal revenue a$ents bet&een 19-G and 19-9 in the possession of the Secretar':%reasurer, the fact that t&ent':five certificates &ere si$ned b' the president of the corporation, for no /ustifiable reason, the fact that t&o sets of certificates &ere issued, the undisputed fact that =aria >. 0astro had made enormous profits and, therefore, had a motive to hide them to evade the pa'ment of ta"es, the fact that the other subscribers had no incomes of sufficient ma$nitude to /ustif' their bi$ subscriptions, the fact that the subscriptions &ere not receipted for and deposited b' the treasurer in the name of the corporation but &ere kept b' =aria >. 0astro herself, the fact that the stockholders or the directors never appeared to have ever met to discuss the business of the corporation, the fact that =aria >. 0astro advanced bi$ sums of mone' to the corporation &ithout an' previous arran$ement or accountin$, and the fact that the books of accounts &ere kept as if the' belon$ed to =aria >. 0astro alone ; these facts are of patent and potent si$nificance. 5hat are their necessar' implicationsM M%r&% 7. C%stro 5o)+* 'ot .%ve %s0e* t.e- to e'*orse t.e&r stoc0 cert&,&c%tes, or be 0ee$&'/ t.ese &' .er $ossess&o', &, t.e1 5ere re%++1 t.e o5'ers. T.e1 'ever 5o)+* .%ve co'se'te* t.%t M%r&% 7. C%stro 0ee$ t.e ,)'*s 5&t.o)t rece&$ts or %cco)'t&'/, 'or t.%t s.e -%'%/es t.e b)s&'ess 5&t.o)t t.e&r 0'o5+e*/e or co'c)rre'ce, 5ere t.e1 o5'ers o, t.e stoc0s &' t.e&r o5' r&/.ts. E%c. %'* ever1 o'e o, t.e ,%cts %++ set ,ort. %bove, &' t.e s%-e -%''er, &s &'co's&ste't 5&t. t.e c+%&- t.%t t.e stoc0.o+*ers, ot.er t.%' M%r&% 7. C%stro, o5' t.e&r s.%res &' t.e&r o5' r&/.t. On the other hand, each and ever' one of them, and all of them, can point to no other conclusion than that =aria >. 0astro &as the sole and e"clusive o&ner of the shares and that the' &ere onl' her dummies. !n our opinion, the facts and circumstances dul' set forth above, all of &hich have been proved to our satisfaction, prove conclusivel' and be'ond reasonable doubt 1section G9, (ule 1@* of the (ules of 0ourt and section -@ of the ,rovisional la& for the application of the ,enal 0ode2 that M%r&% 7. C%stro &s t.e so+e %'* e4c+)s&ve o5'er o, %++ t.e s.%res o, stoc0 o, t.e M%rve+ 7)&+*&'/ Cor$or%t&o' %'* t.%t t.e ot.er $%rt'ers %re .er *)--&es. CONCE8CION MAGSA=SA=CLA7RADOR, SOLEDAD MAGSA=SA=CCA7RERA, LUISA MAGSA=SA=CCOR8UZ, %ss&ste* be .er .)sb%'*, Dr. 6ose Cor$)ulacan. !n 8pril, 19G., petitioner and private respondent e"ecuted a collective bar$ainin$ a$reement effective from 8pril 19G. to =arch 1990. On 4ovember 196. !ndophil 8cr'lic =anufacturin$ 0orporation &as formed. !n 19GG, 8cr'lic became operational and hired &orkers. Sometime in Bul', 19G9, the &orkers of 8cr'lic unionied and a collective bar$ainin$ a$reement &as e"ecuted. !n 1990, the petitioner claimed that the plant facilities built b' 8cr'lic should be considered as an e"tension or e"pansion of the facilities of private respondent pursuant to Section 11c2, 8rticle ! of the 0>8. c2 %his 8$reement shall appl' to the 0ompan'9s plant facilities and installations and to an' e"tension and e"pansion thereat. 1(ollo, p.-2 !t is the petitioner9s contention that 8cr'lic is part of the !ndophil bar$ainin$ unit. %he petitioner9s contention &as opposed b' private respondent &hich submits that it is a /uridical entit' separate and distinct from 8cr'lic. %he parties re#uested the public respondent to act as voluntar' arbitrator. %he public respondent a&arded that Sec. l, 1c2, 8rt. !, of the 19G. 0>8 do 1sic2 not e"tend to the emplo'ees of 8cr'lic. !ssue; 5O4 !ndophil 8cr'lic 0orporation is an e"tension of private respondent 6eld 7 ratio; 4o, affirmed ,etitioner maintains that the creation of the aforesaid !ndophil 8cr'lic is but a devise of respondent 0ompan' to evade the application of the 0>8 bet&een petitioner Enion and respondent 0ompan'. Furthermore, petitioner emphasies that the t&o corporations have the same incorporators, directors and officers. !n fact, of the total stock subscription of !ndophil 8cr'lic, sevent' percent 1.0F2 of the total subscription of ,@,+00,000.00 &as subscribed to b' respondent 0ompan'. ,etitioner notes that the fore$oin$ evidence sufficientl' establish that 8cr'lic is but an e"tension or e"pansion of private respondent, to &it) 1a2 the t&o corporations have their ph'sical plants, offices and facilities situated in the same compound; 1b2 man' of private respondent9s o&n machineries are no& installed and bein$ used in the 8cr'lic plant; 1c2 the services of a number of departments of private respondent are provided to 8cr'lic; and 1d2 the emplo'ees of private respondent are the same persons mannin$ and servicin$ the units of 8cr'lic 5e find the petition devoid of merit. oard, respectivel'. %he conflictin$ statements b' Bacinto place in e"treme doubt his credibilit' anent his alle$ed participation in said transactions. ,etitioner, ho&ever, faults the courts belo& for piercin$ the veil of corporate fiction despite the absence of an' alle$ation in the complaint #uestionin$ the separate identit' of !nland !ndustries, !nc. %his is not accurate. 5hile on the face of the complaint there is no specific alle$ation that the corporation is a mere alter e$o of petitioner, subse#uent developments, from the stipulation of facts up to the presentation of evidence and the e"amination of &itnesses, une#uivocall' sho& that respondent =etropolitan >ank and %rust 0ompan' sou$ht to prove that petitioner and the corporation are one or that he is the corporation. 4o serious ob/ection &as heard from petitioner. Section + of (ule 10 of the (ules of 0ourt provides) Sec. +.8mendment to conform to or authorie presentation of evidence. LL 5hen issues not raised b' the pleadin$s are tried b' e"press or implied consent of the parties, the' shall be treated in all respects, as if the' had been raised in the pleadin$s. Such amendment of the pleadin$s as ma' be necessar' to cause them to conform to the evidence and to raise these issues ma' be made upon motion of an' part' at an' time, even after /ud$ment; but failure so to amend does not affect the trial of these issues. !f the evidence is ob/ected to at the time of trial on the $round that it is not &ithin the issues made b' the pleadin$s, the court ma' allo& the pleadin$s to be amended and shall do so freel' &hen the presentation of the merits of the action &ill be subserved thereb' and the ob/ectin$ part' fails to satisf' the court that the admission of such evidence &ould pre/udice him in maintainin$ his action or defense upon the merits. %he court ma' $rant continuance to enable the ob/ectin$ part' to meet such evidence. ,ursuant thereto, ?&hen evidence is presented b' one part', &ith the e"press or implied consent of the adverse part', as to issues not alle$ed in the pleadin$s, /ud$ment ma' be rendered validl' as re$ards those issues, &hich shall be considered as if the' have been raised in the pleadin$s. %here is implied consent to the evidence thus presented &hen the adverse part' fails to ob/ect thereto. CONCE8T 7UILDERS, INC., vs. NATIONAL LA7OR RELATIONS COMMISSION, GF&rst D&v&s&o'H? %'* Norberto M%r%be? Ro*o+,o R%2)e+, Cr&stob%+ R&e/o, M%')e+ G&++e/o, 8%+cro'&o G&*)cos, 8e*ro Abo&/%r, Norberto Co-e'*%*or, Ro/e+&o S%+)t, E-&+&o G%rc&%, 6r., M%r&%'o R&o, 8%)+&'% 7%se%, et %+ M%1 #!, !!" Facts; %he corporate mask ma' be lifted and the corporate veil ma' be pierced &hen a corporation is /ust but the alter e$o of a person or of another corporation. %he la& in these instances &ill re$ard the corporation as a mere association of persons and, in case of t&o corporations, mer$e them into one. %hus, &here a sister corporation is used as a shield to evade a corporation9s subsidiar' liabilit' for dama$es, the corporation ma' not be heard to sa' that it has a personalit' separate and distinct from the other corporation. %he piercin$ of the corporate veil comes into pla'. !his action raises the ,uestion of -hether the *ational ?abor "elations #ommission committed grave abuse of discretion -hen it issued a @brea1=open order@ to the sheriff to be enforced against property found in the premises of petitioner3s sister company. 0oncept >uilders, !nc., &ith office at Calenuela is en$a$ed in the construction business. ,rivate respondents &ere emplo'ed b' said compan' as laborers.

On 4ovember, 19G1, private respondents &ere served &ritten notices of termination. !t &as stated that their contracts of emplo'ment had e"pired and the pro/ect in &hich the' &ere hired had been completed. ,ublic respondent found it to be, that at the time of the termination the pro/ect had not 'et been finished. ,etitioner had to en$a$e the services of sub:contractors. 8$$rieved, private respondents filed a complaint for ille$al dismissal. %he 3abor 8rbiter ordered petitioner to reinstate private respondents and to pa' them back &a$es amountin$ to ,199,G00.00. %he 3abor 8rbiter issued a &rit of e"ecution. %he &rit &as partiall' satisfied throu$h $arnishment of sums from petitioner9s debtor, the =etropolitan 5ater&orks and Se&era$e 8uthorit', in the amount of ,G1,*G+.*-. On Februar' 19G9, an 8lias 5rit of A"ecution &as issued directin$ the sheriff to collect from herein petitioner the sum of ,11.,-1-..6, representin$ the balance and to reinstate private respondents to their former positions. %he sheriff issued a report statin$ that he tried to serve the alias &rit of e"ecution on petitioner throu$h the securit' $uard on dut' but the service &as refused on the $round that petitioner no lon$er occupied the premises. 1. 8ll the emplo'ees inside petitioner9s premises claimed that the' &ere emplo'ees of 6'dro ,ipes ,hilippines, !nc. 16,,!2 and not b' respondent; @. 3ev' &as made upon personal properties he found in the premises; *. Securit' $uards &ith hi$h:po&ered $uns prevented him from removin$ the properties he had levied upon. - ,rivate respondents filed a ?=otion for !ssuance of a >reak:Open Order,? alle$in$ that 6,,! and petitioner corporation &ere o&ned b' the same incorporator7stockholders. 6,,! filed an Opposition contendin$ that 6,,! is a corporation &hich is separate and distinct from petitioner. 6,,! also alle$ed that the t&o corporations are en$a$ed in t&o different kinds of businesses, i.e., 6,,! is a manufacturin$ firm &hile petitioner &as then en$a$ed in construction. %he 3abor 8rbiter denied private respondents9 motion for break:open order. >ut the 43(0 issued a break:open order. !ssue; 5O4 6,,! ma' be held liable 6eld 7 ratio; Ies, affirmed ,etitioner contends, that the doctrine of piercin$ the corporate veil should not have been applied, in this case, in the absence of an' sho&in$ that it created 6,,! in order to evade its liabilit' to private respondents. !t also contends that 6,,! is en$a$ed in the manufacture and sale of steel, concrete and iron pipes, a business &hich is distinct and separate from petitioner9s construction business. 6ence, it is of no conse#uence that petitioner and 6,,! shared the same premises, the same ,resident and the same set of officers and subscribers. 5e find petitioner9s contention to be unmeritorious. 5hen the notion of separate /uridical personalit' is used to defeat public convenience, /ustif' &ron$, protect fraud or defend crime, or is used as a device to defeat the labor la&s, this separate personalit' of the corporation ma' be disre$arded or the veil of corporate fiction pierced. T.&s &s tr)e +&0e5&se 5.e' t.e cor$or%t&o' &s -ere+1 %' %*()'ct, % b)s&'ess co'*)&t or %' %+ter e/o o, %'ot.er cor$or%t&o'. %he conditions under &hich the /uridical entit' ma' be disre$arded var' accordin$ to the peculiar facts and circumstances of each case. 4o hard and fast rule can be accuratel' laid do&n, but certainl', there are some probative factors of identit' that &ill /ustif' the application of the doctrine of piercin$ the corporate veil, to &it) 1. Stock o&nership b' one or common o&nership of both corporations. @. !dentit' of directors and officers. *. %he manner of keepin$ corporate books and records. -. =ethods of conductin$ the business. %he SA0 en banc e"plained the D&'str)-e't%+&t1 r)+eD &hich the courts have applied in disre$ardin$ the separate /uridical personalit' of corporations as follo&s) 5here one corporation is so or$anied and controlled and its affairs are conducted so that it is, in fact, a mere instrumentalit' or ad/unct of the other, the fiction of the corporate entit' of the ?instrumentalit'? ma' be disre$arded. %he control necessar' to invoke the rule is not ma/orit' or even complete stock control but such domination of instances, policies and practices that the controlled corporation has, so to speak, no separate mind, &ill or e"istence of its o&n, and is but a conduit for its principal. !t must be kept in mind that the control must be sho&n to have been e"ercised at the time the acts complained of took place. =oreover, the control and breach of dut' must pro"imatel' cause the in/ur' or un/ust loss for &hich the complaint is made. %he test in determinin$ the applicabilit' of the doctrine of piercin$ the veil of corporate fiction is as follo&s) 1. 0ontrol, not mere ma/orit' or complete stock control, but complete domination, not onl' of finances but of polic' and business practice in respect to the transaction attacked so that the corporate entit' as to this transaction had at the time no separate mind, &ill or e"istence of its o&n; @. Such control must have been used b' the defendant to commit fraud or &ron$, to perpetuate the violation of a statutor' or other positive le$al dut' or dishonest and un/ust act in contravention of plaintiff9s le$al ri$hts; and *. %he aforesaid control and breach of dut' must pro"imatel' cause the in/ur' or un/ust loss complained of. T.e %bse'ce o, %'1 o'e o, t.ese e+e-e'ts $reve'ts D$&erc&'/ t.e cor$or%te ve&+.D I' %$$+1&'/ t.e D&'str)-e't%+&t1D or D%+ter e/oD *octr&'e, t.e co)rts %re co'cer'e* 5&t. re%+&t1 %'* 'ot ,or-, 5&t. .o5 t.e cor$or%t&o' o$er%te* %'* t.e &'*&v&*)%+ *e,e'*%'t3s re+%t&o's.&$ to t.%t o$er%t&o'. %hus the #uestion of &hether a corporation is a mere alter e$o, a mere sheet or paper corporation, a sham or a subterfu$e is purel' one of fact. !n this case, th&hile petitioner claimed that it ceased its business operations on 8pril 19G6, it filed an !nformation Sheet &ith the SA0 on =a' 19G., statin$ that its office address is Calenuela. 6,,! submitted on the same da', a similar information sheet statin$ that its office address is at Calenuela. Furthermore, both &ere filed b' the same Cir$ilio O. 0asiOo as the corporate secretar'. >oth corporations had the same president, thesame board of directors, the same corporate officers, and substantiall' the same subscribers. Ender this circumstances, 1sic2 it cannot be said that the propert' levied upon b' the sheriff &ere not of respondents. ,etitioner ceased its business operations in order to evade the pa'ment to private respondents of back &a$es and to bar their reinstatement. 6,,! is obviousl' a business conduit of petitioner corporation and its emer$ence &as skillfull' orchestrated to avoid the financial liabilit'. EDUARDO CLA8AROLS, ROMULO AGSAM %'*Ior CLA8AROLS STEEL AND NAIL 8LANT, vs. COURT OF INDUSTRIAL RELATIONS, ALLIED FORKERS3 ASSOCIATION %'*Ior DEMETRIO GARLITOS, ALFREDO ONGSUCO, 6ORGE SEMILLANO, SAL9ADOR DOROTEO, ROSENDO ES8INOSA, LUDO9ICO 7ALO8ENOS, ASER AMANCIO, MAEIMO JUIO=O, GAUDENCIO JUIO=O, %'* IGNACIO JUIO=O 6)+1 3, !;@ Facts; % petition to set aside #ourt of $ndustrial "elations directing petitioners to pay bac1 -ages to private respondents !t appears that on 8u$ust 19+., a complaint for unfair labor practice &as filed b' 8llied 5orkers9 8ssociation, oard (esolution allo&in$ it. %he interference of Cillarama in the comple" affairs of the corporation, and particularl' its finances, are much too inconsistent &ith the ends and purposes of the 0orporation la&, &hich, precisel', seeks to separate personal responsibilities from corporate undertakin$s. It &s t.e ver1 esse'ce o, &'cor$or%t&o' t.%t t.e %cts %'* co'*)ct o, t.e cor$or%t&o' be c%rr&e* o)t &' &ts o5' cor$or%te '%-e bec%)se &t .%s &ts o5' $erso'%+&t1. T.e *octr&'e t.%t % cor$or%t&o' &s % +e/%+ e't&t1 *&st&'ct %'* se$%r%te ,ro- t.e -e-bers %'* stoc0.o+*ers 5.o co-$ose &t &s reco/'& KoL' *&sso+)t&o' t.e $%rt'ers.&$ &s 'ot ter-&'%te*, b)t co't&')es )'t&+ t.e 5&'*&'/ )$ o, $%rt'ers.&$ %,,%&rs &s co-$+ete*. %he le$al personalit' of the e"pirin$ partnership persists for the limited purpose of &indin$ up and closin$ of the affairs of the partnership. !n the case at bar, the ne& partnership simpl' took over the business enterprise &ithout &indin$ up the business affairs of the old partnership. Ender the above described situation, not onl' the retirin$ partners but also the ne& partnership are liable for the debts of the precedin$ partnership. A 5&t.*r%5&'/ $%rt'er re-%&'s +&%b+e to % t.&r* $%rt1 cre*&tor o, t.e o+* $%rt'ers.&$. %he liabilit' of the ne& partnership, upon the other hand is established in 8rticle 1G-0) 8rt. 1G-0. !n the follo&in$ cases creditors of the dissolved partnership are also creditors of the person or partnership continuin$ the business) 112 5hen an' ne& partner is admitted into an e"istin$ partnership, or &hen an' partner retires and assi$ns 1or the representative of the deceased partner assi$ns2 his ri$hts in partnership propert' to t&o or more of the partners, or to one or more of the partners and one or more third persons, if the business is continued &ithout li#uidation of the partnership affairs; P 0reditors of the old Bade =ountain are also creditors of the ne& Bade =ountain &hich continued the business of the old one &ithout li#uidation. !t is clear that under 8rticle 1G-0 >en/amin Iu is entitled to enforce his claim for unpaid salaries a$ainst the ne& Bade =ountain. !t is at the same time evident that the ne& partnership &as entitled to hire a ne& $eneral or assistant $eneral mana$er. %he non:retention of >en/amin Iu is not unla&ful termination. %he precise authoried cause for termination in the case at bar &as redundanc'. %he ne& partnership had its o&n ne& General =ana$er, apparentl' =r. 5ill' 0o. >en/amin Iu9s old position became redundant. ERNESTO CEASE, CECILIA CEASE, MARION CEASE, TERESA CEASECLACE7AL %'* t.e F.L. CEASE 8LANTATION CO., INC. %s Tr)stee o, $ro$ert&es o, t.e *e,)'ct TIAONG MILLING M 8LANTATION COvs. HONORA7LE COURT OF A88EALS, HON. MANOLO L. MADDELA, 8res&*&'/ 6)*/e, Co)rt o, F&rst I'st%'ce o, J)een/amin, Florence and one >onifacia %irante. %he charter of the compan' lapsed in Bune 19+G but &hether there &ere steps to li#uidate it, the record is silent. Forrest 3. 0ease died on 8u$ust 19+9. %he children entered into e"tra/udicial partition of his shares in October 19+9. !t &as here &here the trouble came to arise because it &ould appear that >en/amin and Florence &anted an actual division &hile the other children &anted reincorporation. %he other children Arnesto, %eresita and 0ecilia and >onifacia %irante proceeded to incorporate into the F.3. 0ease ,lantation 0ompan' on en/amin and Florence initiated a ,roceedin$ for the settlement of the estate and one month after the' filed 0ivil 0ase a$ainst Arnesto, %eresita and 0ecilia 0ease askin$ that properties of %iaon$ =illin$ and ,lantation 0orporation be divided amon$ his intestate heirs. On =a', 1961 on the eve of the e"pir' of the three 1*2 'ear period provided b' the la& for the li#uidation of corporations, the board of li#uidators of %iaon$ =illin$ e"ecuted an assi$nment of properties and trust a$reement in favor of F.3. 0ease ,lantation 0o. !nc. as trustee. >oth the civil case and the partition case &ere assi$ned to Bud$e =addela. %he Bud$e held for the pla