Session 1 – January 31

I. Introduction

A. Constitutional Basis – Article XII, Section 16, 1987 Philippine Constitution

Section 16. The Congress shall not, except by general law, provide for the formation, organization, or
regulation of private corporations. Government owned or controlled corporations may be created or
established by special charters in the interest of the common good and subject to the test of economic
viability.

Case:
Feliciano v. COA, GR No. 147402, January 14, 2004

Facts:
Leyte Metropolitan Water District was audited by a special audit team from COA. It then received a letter
from COA requesting payment of audit fees. Feliciano, as manager of LMWD, refuses to pay. Commission
on Audit insisted that it has the authority to audit LMWD.

Issue:
WON Leyte Metropolitan Water District is a private corporation.

Ruling: No

LWDs are not private corporations because they are not created under the Corporation Code. LWDs exist
by virtue of PD198, which constitutes their special charter. Since under the Constitution only government-
owned or controlled corporations may have special charters, LWDs can validly exist only if they are
government-owned or controlled. To claim that LWDs are private corporations with a special charter is to
admit that their existence is constitutionally infirm.

B. Brief History of the Corporation Code – pp. 2-5, Vol. 1, Lopez

C. Other Forms of Business Organization

1. Single Proprietorship – pp. 27-29, Vol 1, Lopez
2. Partnerships – pp. 29-50, Vol 1, Lopez
3. Joint Ventures – Appendix C, Villanueva
4. Other Forms – pp52-53, Vol 1, Lopez

II. Nature, Attributes and Classifications of Corporations

A. Definition – Section 2, Corporation Code; pp. 13-15, Vol 1, Lopez

A corporation is an artificial being created by operation of law, having the right of
succession and the powers, attributes and properties expressly authorized by law or
incident to its existence.

B. Attributes -
1. Corporation as an Artificial Being
a. Theory of Concession – pp. 11-12, Villanueva
It is a principle in the creation of corporation, under which a corporation is an
artificial creature without any existence until it has received the imprimatur of
the State acting according to the law, through the SEC. The life of the law is a
concession made by the State.

Tagay v. Buenget Consolidated, Inc, 26 SCRA 242 (1968)

Facts:
Idona Slade Perkins died in New York. Perkin’s domiciliary administrator,
Country Trust Company of New York, refused to surrender to the ancillary
administrator in the Philippines the stock certificates owned by her in a
Philippine corporation, Benguet Consolidated, Inc., to satisfy the legitimate
claims of local creditors. The Court ordered that the stock certificates be
deemed lost and ordered Benguet Consolidated to issue new shares. Benguet
Consolidated refuses to do so, invoking one of the provisions of its by-laws
which would set forth the procedure to be followed in case of a lost, stolen or
destroyed stock certificate; it would stress that in the event of a contest or the
pendency of an action regardingownership of such certificate or. certificates of
stock allegedly lost, stolen or destroyed, the issuance of a new certificate or
certificates would await the "final decision by [a] court regarding theownership
[thereof]."

Issue: WON a provision of the by-law may prevail over a court order.

Ruling: No

We start with the undeniable premise that, "a corporation is an artificial being
created by operation of law x x x."

A corporation as known to Philippine jurisprudence is a creature without any

existence until it has received the imprimatur of the state acting according to
law. It is logically inconceivable therefore that it will have rights and privileges of
a higher priority than that of its creator.

More than that, it cannot legitimately refuse to yield obedience to acts of its
state organs, certainly not excluding the judiciary, whenever called upon to do
so.

Ang Pue and Co v Secretary of Commerce and Industry, 5 SCRA 645 (1972)

Facts:
On May 1, 1953, Ang Pue and Tan Siong, both Chinese citizens, organized the
partnership Ang Pue & Company for a term of five years from May 1, 1953,
extendible by their mutual consent.
On June 19, 1954 Republic Act No. 1180 was enacted to regulate the retail
business. It provided, among other things, that, after its enactment, a
partnership not wholly formed by Filipinos could continue to engage in the retail
business until the expiration of its term.
On April 15, 1958—prior to the expiration of the fiveyear term of the partnership
Ang Pue & Company, but after the enactment of the Republic Act 1180, the
partners already mentioned amended the original articles of partnership
(Exhibit B) so as to extend the term of life of the partnership to another five
years. When the amendedarticles were presented for registration in the Office
of the Securities & Exchange Commission on April 16, 1958, registration was
refused upon the ground that the extension was in violation of the aforesaid
Act.
Issue:
WON the appellants may extend for five years the term of the partnership
pursuant to an amendment.

Ruling: No.

To organize a corporation or a partnership that could claim a juridical

personality of its own and transact business as such, is not a matter of absolute
right but a privilege which may be enjoyed only under such terms as the State
may deem necessary to impose. That the State, through Congress and in the
manner provided by law, had the right to enact Republic Act No. 1180 and to
provide therein that only Filipinos and concerns wholly owned by Filipinos may
engage in the retail business cannot be seriously disputed. That this provision
was clearly intended to apply to partnership already existing at the time of the
enactment of the law is clearly shown by its provision giving them the right to
continue engaging in their retail business until the expiration of their term or life.

To argue that because the original articles of partnership provided that the
partners could extend the term of the partnership, the provisions of Republic
Act 1180 cannot adversely affect appellants herein, is to erroneously assume
that the aforesaid provision constitute a property right of which the partners can
not be deprived without due process or without their consent. The agreement
contained therein must be deemed subject to the law existing at the time when
the partners came to agree regarding the extension.

Torres v. Court of Appeals, 278 SCRA 793

Facts:
The late Manuel A. Torres, Jr. (Judge Torres for brevity) was the majority
stockholder of Tormil Realty & Development Corporation while private
respondents whoare the children of Judge Torres’ deceased brother Antonio A.
Torres, constituted the minority stockholders.
The 1987 annual stockholders meeting and election of directors of Tormil
corporation was scheduled on 25 March 1987 in compliance with the provisions
of its by-laws. Pursuant thereto, Judge Torres assigned from his own shares,
one (1) share each to petitioners Tobias, Jocson, Jurisprudencia, Azura and
Pabalan. These assigned shares were in the nature of “qualifying shares,” for
the sole purpose of meeting the legal requirement to be able to elect them
(Tobias and company) to the Board of Directors as Torres’ nominees.The
petitioners-nominees were elected as Board of Directors.

Issue:
WON petitioners-assignees Tobias, Jocson, Jurisprudencia, Azura and
Pabalan are legitimate stockholders of the corporation.

Ruling: No
Petitioners insist that the assignment of “qualifying shares” to the nominees of
the late Judge Torres (herein petitioners) does not partake of the real nature of
a transfer or conveyance of shares of stock as would call for the “imposition of
stringent requirements (with respect to the) recording of the transfer of said
shares.” Anyway, petitioners add, there was substantial compliance with the
above-stated requirement since said assignments were entered by the late
Judge Torres himself in the corporation’s stock and transfer book on 6 March
1987, prior to the 25 March 1987 annual stockholders meeting and which
entries were confirmed on 8 March 1987 by petitioner Azura who was
appointed Assistant Corporate Secretary by Judge Torres.

Petitioners’ contentions lack merit.

It is precisely the brewing family discord between JudgeTorres and private

respondents—his nephew and nieces that should have placed Judge Torres on
his guard. He should have been more careful in ensuring that his actions
(particularly the assignment of qualifying shares to his nominees) comply with
the requirements of the law.
Petitioners cannot use the flimsy excuse that it would have been a vain attempt
to force the incumbent corporate secretary to register the aforestated
assignments in the stock and transfer book because the latter belonged to the
opposite faction. It is the corporate secretary’s duty and obligation to register
valid transfers of stocks and if said corporate officer refuses to comply, the
 transferor-stockholder may rightfully bring suit to compel performance.25 In
other words, there are remedies within the law that petitioners could have
availed of, instead of taking the law in their own hands, as the cliché goes.

All corporations, big or small, must abide by the provisions of the Corporation
Code. Being a simple family corporation is not an exemption. Such
corporations cannot have rules and practices other than those established by
law.
b. Theory of Enterprise Entity – pp. 12-15, Villanueva
Philippine Stock Exchange, Inc. v. Court of Appeals, 281 SCRA 232

Facts:
The Puerto Azul Land, Inc. (PALI), a domestic real estate corporation, had
sought to offer its shares to the public in order to raise funds allegedly to
develop its properties and pay its loans with several banking
institutions.
In its regular meeting held on March 27, 1996, the Board of Governors of the
PSE reached its decision to reject PALI’s application, citing the existence of
serious claims, issues and circumstances surrounding PALI’s ownership over
its assets that adversely affect the suitability of listing PALI’s shares in the stock
exchange.
The SEC reversed the decision of the PSE. The Court of Appeals affirmed the
decision of the SEC.

Issue:
WON SEC has the power to order the listing of sale of shares of PALI and to
review and substitute decisions of PSE on listing applications.

Ruling: No
We affirm that the SEC is the entity with the primary say as to whether or not
securities, including shares of stock of a corporation, may be traded or not in
the stock exchange. This is in line with the SEC’s mission to ensure proper
compliance with the laws, such as the Revised Securities Act and to regulate
the sale and disposition of securities in the country.
This is not to say, however, that the PSE’s management prerogatives are under
the absolute control of the SEC. The PSE is, after all, a corporation authorized
by its corporate franchise to engage in its proposed and duly approved
business. One of the PSE’s main concerns, as such, is still the generation of
profit for its stockholders. Moreover, the PSE has all the rights pertaining to
corporations, including the right to sue and be sued, to hold property in its own
name, to enter (or not to enter) into contracts with third persons, and to perform
 all other legal acts within its allocated express or implied powers. A corporation
is but an association of individuals, allowed to transact under an assumed
corporate name, and with a distinct legal personality. In organizing itself as a
collective body, it waives no constitutional immunities and perquisites
appropriate to such a body.11 As to its corporate and manage-ment decisions,
therefore, the state will generally not interfere with the same. Questions of
policy and of management are left to the honest decision of the officers and
directors of a corporation, and the courts are without authority to substitute their
judgment for the judgment of the board of directors. The board is the business
manager of the corporation, and so long as it acts in good faith, its orders are
not reviewable by the courts.
Thus, notwithstanding the regulatory power of the SEC over the PSE, and the
resultant authority to reverse the PSE’s decision in matters of application for
listing in the market, the SEC may exercise such power only if the PSE’s
judgment is attended by bad faith. In Board of Liquidators vs. Kalaw,13 it was
held that bad faith does not simply connote bad judgment or negligence. It
imports a dishonest purpose or some moral obliquity and conscious doing of
wrong. It means a breach of a known duty through some motive or interest of ill
will, partaking of the `nature of fraud.
c. Doctrine of Legal Entity – pp. 15-18, Vol 1, Lopez
A corporation is invested by law with a personality separate and distinct from
those of the persons composing it as well as from that of any other legal entity
to which it may be related.

Palay Inc. v Clave, 124 SCRA 638

The Resolution, dated May 2, 1980, issued by Presidential
Executive Assistant Jacobo Clave in O.P. Case No. 1459,
directing petitioners Palay, Inc. and Alberto Onstott,
jointly and severally, to refund to private respondent,
Nazario Dumpit, the amount of P13,722.50 with 12%
interest per annum, as resolved by the National Housing
Authority in its Resolution of July 10, 1979 in Case No.
2167, as well as the Resolution of October 28, 1980
denying petitioners’ Motion for Reconsideration of said
Resolution of May 2, 1980, are being assailed in this
petition.

Issue:
WON Alberto Ostott, in his capacity as President of Palay, Inc. may be made
liable to Nazario Dumpit.

Ruling:
 It is basic that a corporation is invested by law with a personality separate and
distinct from those of the persons composing it as well as from that of any other
legal entity to which it may be related.11 As a general rule, a corporation may
not be made to answer for acts or liabilities of its stockholders or those of the
legal entities to which it may be connected and vice versa. However, the veil of
corporate fiction may be pierced when it is used as a shield to further an end
subversive of justice12; or for purposes that could not have been intended by
the law that created it13; or to defeat public convenience, justify wrong, protect
fraud, or defend crime14; or to perpetuate fraud or confuse legitimate issues;15
or to circumvent the law or perpetuate deception;16 or as an alter ego, adjunct
or business conduit for the sole benefit of the stockholders.17
In this case, petitioner Onstott was made liable because he was then the
President of the corporation and he appeared to be the controlling stockholder.
No sufficient proof exists on record that said petitioner used the corporation to
defraud private respondent, He cannot, therefore, be made personally liable
just because he “appears to be the controlling stockholder.” Mere ownership by
a single stockholder or by another corporation of all or nearly all of the capital
stock of a corporation is not of itself sufficient ground for disregarding the
separate corporate personality.18 In this respect then, a modification of the
Resolution under review is called for.

Soriano v Court of Appeals, 174 SCRA 195

Issue:
WON the petitioners may be made jointly and severally liable in their personal
capacity to Gervasion Cu.

Ruling: No

d. Doctrine of Piercing the Veil of Corporate Fiction

Cagayan Valley Enterprises Inc. v Court of Appeals, 179 SCRA 218

Issue:
WON Cagayan Valley Enterprises, Inc. and Cagayan Valley Distillery as a
corporate entity, are one and the same.

Ruling: Yes

However, in this case an award of damages to LTI is ineluctably called for.

Petitioner cannot claim good faith. The record shows that it had actual
knowledge that the bottles with the blown-in marks “La Tondeña, Inc.” and
“Ginebra San Miguel” are duly registered. In Civil Case No. 102859 of the Court
of First Instance of Manila, entitled “La Tondeña, Inc. versus Diego Lim, doing
business under the name and style ‘Cagayan Valley Distillery,’ ” a decision was
 rendered in favor of plaintiff therein on the basis of the admission and/or
acknowledgment made by the defendant that the bottles marked only with the
words “La Tondeña, Inc.” and “Ginebra San Miguel” are registered bottles of
LTI.2
Petitioner cannot avoid the effect of the admission and/or acknowledgment
made by Diego Lim in the said case. While a corporation is an entity separate
and distinct from its stockholders and from other corporations with which it may
be connected, where the discreteness of its personality is used to defeat public
convenience, justify wrong, protect fraud, or defend crime, the law will regard
the corporation as an association of persons, or in the case of two corporations,
merge them into one. When the corporation is the mere alter ego or business
conduit of a person, it may be disregarded.
Petitioner’s claim that it is separate and distinct from the former Cagayan Valley
Distillery is belied by the evidence on record. The following facts warrant the
conclusion that petitioner, as a corporate entity, and Cagayan Valley Distillery
are one and the same, to wit: (1) petitioner is being managed by Rogelio Lim,
the son of Diego Lim, the owner and manager of Cagayan Valley Distillery; (2)
it is a family corporation;24 (3) it is an admitted fact that before petitioner was
incorporated it was under a single proprietorship;25 (4) petitioner is engaged in
the same business as Cagayan Valley Distillery, the manufacture of wines and
liquors; and (5) the factory of petitioner is located in the same place as the
factory of the former Cagayan Valley Distillery. It is thus clear that herein
petitioner is a mere continuation and successor of Cagayan Valley Distillery. It
is likewise indubitable that the admission made in the former case, as earlier
explained, is binding on it as cogent proof that even before the filing of this
case it had actual knowledge that the bottles in dispute were registered
containers of LTI.

2. Corporation as a Creation of Law – pp. 23-25, Vol 1, Lopez

SEC Opinion dated June 22, 1971, Mr. Emmanuel Mangubat
SEC Opinion dated March 24, 1972, Rompal Mining Company
3. Right of Succession – pp. 25-26, Vol 1, Lopez
4. Express Powers Granted by Law – p 26, Vol 1, Lopez
Section 36, Corporation Code

C. Advantages and Disadvantages of Corporate Form – pp 20- 26, Villanueva

I. Advantages
a. Strong juridical personality
b. Centralized management
c. Limited liability to investors
d. Free transferability of units of investments
e. Advantages over unregistered associations
II. Disadvantages
a. Complicated and costly formation and maintenance
b. Lack of personal element and abuse of corporate management
c. Limited liability hits innocent victims
d. Double taxation
D. Entitlement to Constitutional Guarantees – pp. 32-46, Villanueva
I. Entitled to:
 Due process
 Equal protection of laws
 Unreasonable searches and seizures
II. Not entitled to:
 Right against self-incrimation
Smith, Bell & Co v Natividad, 40 Phil 136 (1919)
Facts:
Smith, Bell & Co. was denied registry of its ship because its owners are all not Filipino
citizens

Issue:
WON Smith, Bell & Co is entitled to the right to equal protection of law.

Ruling: Yes

The guarantees of the Fourteenth Amendment and so of the first paragraph of the
Philippine Bill of Rights , are universal in their application to all persons within the territorial
jurisdiction, without regard to any differences of race, color or nationality. The word person
includes aliens. Private corporations, likewise, are persons within the scope of the
guaranties in so far as their property is concerned. Classification with the end in view of
providing diversity of treatment may be made among corporations, but must be based upon
some reasonable ground and not be a mere arbitrary selection.

We are inclined to the view that 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 law clause of the Philippine Bill of Rights, nevertheless, Act No. 2761 of the
Phiippine Legislature, in denying to corporations the right to register vessels in the
Philippines coastwide trae, does not belong to that vicious species of class legislation which
must always be condemned, but does fall within authorized exceptions, notably, within the
purview of the police power, and so does not offend against the constitutional provision.

Stonehill v Diokno, 20 SCRA 383 (1967)

Facts:
Upon application of the officers of the government named on the margin 1 — hereinafter
referred to as Respondents-Prosecutors — several judges2 — hereinafter referred to as
Respondents-Judges — issued, on different dates,3 a total of 42 search warrants against
petitioners herein4 and/or the corporations of which they were officers,5 directed to the any
peace officer, to search the persons above-named and/or the premises of their offices,
warehouses and/or residences, and to seize and take possession of the following personal
property to wit:
Books of accounts, financial records, vouchers, correspondence, receipts, ledgers, journals,
portfolios, credit journals, typewriters, and other documents and/or papers showing all
business transactions including disbursements receipts, balance sheets and profit and loss
statements and Bobbins (cigarette wrappers).
as "the subject of the offense; stolen or embezzled and proceeds or fruits of the offense," or
"used or intended to be used as the means of committing the offense," which is described in
the applications adverted to above as "violation of Central Bank Laws, Tariff and Customs
Laws, Internal Revenue (Code) and the Revised Penal Code."
Petitioners filed with the Supreme Court this original action for certiorari,
prohibition, mandamus and injunction, and prayed that, pending final disposition of the
present case, a writ of preliminary injunction be issued restraining Respondents-
Prosecutors, their agents and /or representatives from using the effects seized as
aforementioned or any copies thereof, in the deportation cases already adverted to, and
that, in due course, thereafter, decision be rendered quashing the contested search
warrants and declaring the same null and void, and commanding the respondents, their
agents or representatives to return to petitioners herein, in accordance with Section 3, Rule
67, of the Rules of Court, the documents, papers, things and cash moneys seized or
confiscated under the search warrants in question.
Thus, the documents, papers, and things seized under the alleged authority of the warrants
in question may be split into two (2) major groups, namely: (a) those found and seized in the
offices of the aforementioned corporations, and (b) those found and seized in the
residences of petitioners herein.

Issue:
WON the petitioners may assail the illegality of the contested warrants and of the seizures
made in pursuant thereof.

Ruling: No

As regards the first group, we hold that petitioners herein have no cause of action to assail
the legality of the contested warrants and of the seizures made in pursuance thereof, for the
simple reason that said corporations have their respective personalities, separate and
distinct from the personality of herein petitioners, regardless of the amount of shares of
stock or of the interest of each of them in said corporations, and whatever the offices they
hold therein may be.8 Indeed, it is well settled that the legality of a seizure can be
contested only by the party whose rights have been impaired thereby, 9 and that the
objection to an unlawful search and seizure is purely personal and cannot be availed of by
third parties. 10 Consequently, petitioners herein may not validly object to the use in
evidence against them of the documents, papers and things seized from the offices and
premises of the corporations adverted to above, since the right to object to the admission of
said papers in evidence belongs exclusively to the corporations, to whom the seized effects
belong, and may not be invoked by the corporate officers in proceedings against them in
their individual capacity.

Bache & Co (Phil) Inc. v Ruiz, 37 SCRA 823 (1971)

Issue:
WON the petitioners can validly object to the use in evidence against them of the
documents, papers, and things seized from the offices and premises of the corporations.

Ruling: No
Although, for the reasons above stated, we are of the opinion that an officer of a corporation
which is charged with a violation of a statute of the state of its creation, or of an act of
Congress passed in the exercise of its constitutional powers, cannot refuse to produce the
books and papers of such corporation, we do not wish to be understood as holding that a
corporation is not entitled to immunity, under the 4th Amendment, against unreasonable
searches and seizures. A corporation is, after all, but an association of individuals under an
assumed name and with a distinct legal entity. In organizing itself as a collective body it
waives no constitutional immunities appropriate to such body. Its property cannot be taken
without compensation. It can only be proceeded against by due process of law, and is
protected, under the 14th Amendment, against unlawful discrimination . . ." (Hale v. Henkel,
201 U.S. 43, 50 L. ed. 652.)
It is well settled that the legality of a seizure can be contested only by the party whose rights
have been impaired thereby, and that the objection to an unlawful search and seizure is
purely personal and cannot be availed of by third parties. Consequently, petitioners herein
may not validly object to the use in evidence against them of the documents, papers and
things seized from the offices and premises of the corporations adverted to above, since the
right to object to the admission of said papers in evidence belongs exclusively to the
corporations, to whom the seized effects belong, and may not be invoked by the corporate
officers in proceedings against them in their individual capacity . . ."cr

PNB v Court of Appeals, 83 SCRA 237

Issue:
WON a corporation may be held liable for tort.

Ruling: Yes

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."

People v Concepcion, 44 Phil 129 (1922)

Issue:
WON the granting of credit to the copartnership by Venancio Concepcion, President of
PNB, in violation of section 35 of Act 2747.
Ruling: Yes
The answer is that when the corporation itself is forbidden to do an act, the prohibition
extends to the board of directors, and to each director separately and individually.

People v Tan Boon Koong, 54 Phil 607

Issue:
WON Tan Boon Kong, as manager of the corporation, may be held criminally liable.

Ruling: Yes

Apparently, the court below based the appealed ruling on the ground that the offense
charged must be regarded as committed by the corporation and not by its officials or
agents. This view is in direct conflict with the great weight of authority. a corporation can act
only through its officers and agent s, and where the business itself involves a violation of the
law, the correct rule is that all who participate in it are liable.

In the present case the information or complaint alleges that he defendant was the manager
of a corporation which was engaged in business as a merchant, and as such manager, he
made a false return, for purposes of taxation, of the total amount of 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 that the allegation are proven.

Sia v People, 121 SCRA 655 (1983)

Issue:
WON Jose Sia, having only acted for and in behalf of the Metal Manufacturing Company of
the Philippines (Metal Company, for short) as President thereof in dealing with the
complainant, the Continental Bank, (Bank for short) may be liable for the crime charged.

Ruling: No

In the present case, a distinction is to be found with the Tan Boon Kong case in that 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 parties, as a practice
observed in the usual pursuit of a business or a commercial transaction. The offense may
arise, if at all, from the peculiar terms and condition agreed upon by the parties to the
transaction, not by direct provision of the law. The intention of the parties, therefore, is a
factor determinant of whether a crime was committed or whether a civil obligation alone
intended by the parties. With this explanation, the distinction adverted to between the Tan
Boon Kong case and the case at bar should come out clear and meaningful. 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 provisions 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. In all criminal prosecutions, the
existence of criminal liability for which the accused is made answerable must be clear and
certain. The maxim that all doubts must be resolved in favor of the accused is always of
compelling force in the prosecution of offenses. This Court has thus far not ruled on the
criminal liability of an officer of a corporation signing in behalf of said corporation a trust
receipt of the same nature as that involved herein. In the case of Samo vs. People, L-
17603-04, May 31, 1962, the accused was not clearly shown to be acting other than in his
own behalf, not in behalf of a corporation.

It is worthy of note that the civil liability imposed by the trust receipt is exclusively on the
Metal Company. Speaking of such liability alone, as one arising from the contract, as
distinguished from the civil liability arising out of a crime, the petitioner was never intended
to be equally liable as the corporation. Without being made so liable personally as the
corporation is, there would then be no basis for holding him criminally liable, for any
violation of the trust receipt. This is made clearly so upon consideration of the fact that in
the violation of the trust agreement and in the absence of positive evidence to the contrary,
only the corporation benefited, not the petitioner personally, yet, the allegation of the
information is to effect that the misappropriation or conversion was for the personal use and
benefit of the petitioner, with respect to which there is variance between the allegation and
the evidence.

Asset Privatization Trust v Court of Appeals, 300 SCRA 579 (1998)

Issue:
1. WON the financial restructuring program is valid.
2. WON a corporation is entitled to moral damages.
3. WON the award of damages to MMIC is valid.
4. WON moral damages awarded to Jesus Cabarrus is valid.

Ruling:
1. No.
As a rule, a corporation exercises its powers, including the power to enter into
contracts, through its board of directors. While a corporation may appoint agents to
enter into a contract in its behalf, the agent should not exceed his authority. 54 In the
case at bar, there was no showing that the representatives of PNB and DBP in MMIC
even had the requisite authority to enter into a debt-for-equity swap. And if they had
such authority, there was no showing that the banks, through their board of directors,
had ratified the FRP.
2. Yes.
Under Article 2217 of the Civil Code, moral damages include besmirched reputation
which a corporation may possibly suffer.
3. No.
Civil Case No. 9900 filed before the RTC being a derivative suit, MMIC should have
been impleaded as a party. It was not joined as a party plaintiff or party defendant at
any stage of the proceedings. As it is, the award of damages to MMIC, which was not a
party before the Arbitration Committee, is a complete nullity.
Settled is the doctrine that in a derivative suit, the corporation is the real party in interest
while the stockholder filing suit for the corporation's behalf is only a nominal party. The
corporation should be included as a party in the suit.
4. No.
Cabarrus cause of action for the seizure of the assets belonging to IEI, of which he is
the majority stockholder, having been ventilated in a complaint he previously filed with
the RTC, from which he obtained actual damages, he was barred by res judicata from
filing a similar case in another court, this time asking for moral damages which he failed
to get from the earlier case. 62 Worse, private respondents violated the rule against non-
forum shopping.
It is a basic postulate that a corporation has a personality separate and distinct from its
stockholders. 63 The properties foreclosed belonged to MMIC, not to its stockholders.
Hence, if wrong was committed in the foreclosure, it was done against the corporation.
Another reason is that Jesus S. Cabarrus, Sr. cannot directly claim those damages for
himself that would result in the appropriation by, and the distribution to, him part of the
corporation's assets before the dissolution of the corporation and the liquidation of its
debts and liabilities. The Arbitration Committee, therefore, passed upon matters nor
submitted to it. Moreover, said cause of action had already been decided in a separate
case. It is thus quite patent that the arbitration committee exceeded the authority
granted to it by the parties' Compromise and Arbitration Agreement by awarding moral
damages to Jesus S. Cabarrus, Sr.

ABS-CBN v Court of Appeals, 301 SCRA 589 (1999)

Issue:
1. WON Del Rosario had the authority to accept ABS-CBN’s counteroffer
2. WON a corporation may be entitled to moral damages.

Ruling:
1. No
Under Corporation Code,46 unless otherwise provided by said Code, corporate powers,
such as the power; to enter into contracts; are exercised by the Board of Directors.
However, the Board may delegate such powers to either an executive committee or
officials or contracted managers. The delegation, except for the executive committee,
must be for specific purposes, 47 Delegation to officers makes the latter agents of the
corporation; accordingly, the general rules of agency as to the bindings effects of their
acts would
apply. 48 For such officers to be deemed fully clothed by the corporation to exercise a
power of the Board, the latter must specially authorize them to do so. That Del Rosario
did not have the authority to accept ABS-CBN's counter-offer was best evidenced by
his submission of the draft contract to VIVA's Board of Directors for the latter's approval.
In any event, there was between Del Rosario and Lopez III no meeting of minds.
2. No
The award of moral damages cannot be granted in favor of a corporation because,
being an artificial person and having existence only in legal contemplation, it has no
feelings, no emotions, no senses, It cannot, therefore, experience physical suffering
and mental anguish, which call be experienced only by one having a nervous
system. 65 The statement in People v. Manero 66 and Mambulao Lumber
 Co. v. PNB 67 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 alone
the award for damages must be set aside, since RBS is a corporation.

Filipinas Broadcasting Network v AMEC-BCCM, GR 141994, January 17, 2005

Issue:
WON a corporation is entitled to moral damages for libel and other forms of defamation.

Ruling: 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.40 The Court of Appeals cites Mambulao
Lumber Co. v. PNB, et al.41 to justify the award of moral damages. However, the Court’s
statement in Mambulao 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.42
Nevertheless, AMEC’s claim for moral damages falls under item 7 of Article 221943 of the
Civil Code. This provision expressly authorizes the recovery of moral damages in cases of
libel, slander or any other form of defamation. Article 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.44
Moreover, where the broadcast is libelous per se, the law implies damages.45 In such a
case, evidence of an honest mistake or the want of character or reputation of the party
libeled goes only in mitigation of damages.46 Neither in such a case is the plaintiff required
to introduce evidence of actual damages as a condition precedent to the recovery of some
damages.47 In this case, the broadcasts are libelous per se. Thus, AMEC is entitled to moral
damages.

First Lepanto-Taisho Insurance Corporation v Chevron, 663 SCRA 309 (2012)

Issue:
WON FLTIC is entitled to moral damages.

Ruling: No

Finally, we hold that the trial court correctly dismissed petitioners counterclaim for moral
damages and attorneys fees. The filing alone of a civil action should not be a ground for an
award of moral damages in the same way that a clearly unfounded civil action is not among
the grounds for moral damages.[27] Besides, 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.[28] Although in some recent cases we have held that 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 so because moral damages, though incapable of pecuniary estimation, are in
the category of an award designed to compensate the claimant for actual injurysuffered
and not to impose a penalty on the wrongdoer.[29] There is no evidence presented to
establish the factual basis of petitioners claim for moral damages.

Revised Penal Code, Section 13

Art. 13. Mitigating circumstances. — The following are mitigating circumstances;
1. Those mentioned in the preceding chapter, when all the requisites necessary to justify or
to exempt from criminal liability in the respective cases are not attendant.chanrobles virtual
law library
2. That the offender is under eighteen year of age or over seventy years. In the case of the
minor, he shall be proceeded against in accordance with the provisions of Art.
80.chanrobles virtual law library
3. That the offender had no intention to commit so grave a wrong as that
committed.chanrobles virtual law library
4. That sufficient provocation or threat on the part of the offended party immediately
preceded the act.chanrobles virtual law library
5. That the act was committed in the immediate vindication of a grave offense to the one
committing the felony (delito), his spouse, ascendants, or relatives by affinity within the
same degrees.chanrobles virtual law library
6. That of having acted upon an impulse so powerful as naturally to have produced passion
or obfuscation.chanrobles virtual law library
7. That the offender had voluntarily surrendered himself to a person in authority or his
agents, or that he had voluntarily confessed his guilt before the court prior to the
presentation of the evidence for the prosecution;
8. That the offender is deaf and dumb, blind or otherwise suffering some physical defect
which thus restricts his means of action, defense, or communications with his fellow
beings.chanrobles virtual law library
9. Such illness of the offender as would diminish the exercise of the will-power of the
offender without however depriving him of the consciousness of his acts.chanrobles virtual
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10. And, finally, any other circumstances of a similar nature and analogous to those above
mentioned.

Ching v Secretary of Justice, GR No. 164317, February 2006

Issue:
WON petitioner may be held criminally liable.

Ruling: Yes

The Court rules that although petitioner signed the trust receipts merely as Senior Vice-
President of PBMI and had no physical possession of the goods, he cannot avoid
prosecution for violation of P.D. No. 115.
The penalty clause of the law, Section 13 of P.D. No. 115 reads:
If the violation or offense is committed by a corporation, partnership, association or other
juridical entities, the penalty provided for in this Decree shall be imposed upon the directors,
officers, employees or other officials or persons therein responsible for the offense, without
prejudice to the civil liabilities arising from the criminal offense.
Though the entrustee is a corporation, nevertheless, the law specifically makes the officers,
employees or other officers or persons responsible for the offense, without prejudice to the
civil liabilities of such corporation and/or board of directors, officers, or other officials or
employees responsible for the offense. The rationale is that such officers or employees are
vested with the authority and responsibility to devise means necessary to ensure
compliance with the law and, if they fail to do so, are held criminally accountable; thus, they
have a responsible share in the violations of the law.48
If the crime is committed by a corporation or other juridical entity, the directors, officers,
employees or other officers thereof responsible for the offense shall be charged and
penalized for the crime, precisely because of the nature of the crime and the penalty
therefor. A corporation cannot be arrested and imprisoned; hence, cannot be penalized for
a crime punishable by imprisonment.49 However, a corporation may be charged and
prosecuted for a crime if the imposable penalty is fine. Even if the statute prescribes both
fine and imprisonment as penalty, a corporation may be prosecuted and, if found guilty, may
be fined.
In this case, petitioner signed the trust receipts in question. He cannot, thus, hide behind the
cloak of the separate corporate personality of PBMI. In the words of Chief Justice Earl
Warren, a corporate officer cannot protect himself behind a corporation where he is the
actual, present and efficient actor.

ABS-CBN v Gozon, 753 SCRA 1 (2015)

Issue:
WON corporate officers and/or agents may be held individually liable for a crime committed
under the Intellectual Property Code.

Ruling: Yes.

Petitioners, being corporate officers and/or directors, through whose act, default or omission
the corporation commits a crime, may themselves be individually held answerable for the
crime. . . . The existence of the corporate entity does not shield from prosecution the
corporate agent who knowingly and intentionally caused the corporation to commit a crime.
Thus, petitioners cannot hide behind the cloak of the separate corporate personality of the
corporation to escape criminal liability. A corporate officer cannot protect himself behind a
corporation where he is the actual, present and efficient actor.159
However, the criminal liability of a corporation’s officers or employees stems from their
active participation in the commission of the wrongful act:
The principle applies whether or not the crime requires the consciousness of wrongdoing. It
applies to those corporate agents who themselves commit the crime and to those, who, by
virtue of their managerial positions or other similar relation to the corporation, could be
deemed responsible for its commission, if by virtue of their relationship to the corporation,
they had the power to prevent the act. Moreover, all parties active in promoting a crime,
whether agents or not, are principals. Whether such officers or employees are benefited by
their delictual acts is not a touchstone of their criminal liability. Benefit is not an operative
fact.160 (Emphasis supplied) An accused’s participation in criminal acts involving violations
of intellectual property rights is the subject of allegation and proof. The showing that the
accused did the acts or contributed in a meaningful way in the commission of the
infringements is certainly different from the argument of lack of intent or good faith. Active
participation requires a showing of overt physical acts or intention to commit such acts.
Intent or good faith, on the other hand, are inferences from acts proven to have been or not
been committed.
We find that the Department of Justice committed grave abuse of discretion when it
resolved to file the Information against respondents despite lack of proof of their actual
participation in the alleged crime.

** Optional Reading: Corporate Crime and the Criminal Liability of Corporate Entities, Alex
Manolito C. Labrador (published December 2008 as part of Resource Material No. 76 at
the 137th International Training Course of the United Nations Asia and Far East Institute)
See https://www.unafei.or.jp/publications/pdf/RS_No76/No76_09PA_Labador.pdf)