Corporation Quiz Week 1

1 Petitioner also contends that LWDs are private corporations because Section 6 of PD 198 declares that
LWDs "shall be considered quasi-public" in nature. Decide. (Feliciano v COA)

Answer:
LWDs exist by virtue of PD 198, 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. Unlike private corporations, which
derive their legal existence and power from the Corporation Code, LWDs derive their legal existence and
power from PD 198.

2 Respondents argue that MIAA, being a government-owned or controlled corporation, is not exempt
from real estate tax. Respondents claim that the deletion of the phrase "any government-owned or
controlled so exempt by its charter" in Section 234(e) of the Local Government Code withdrew the real
estate tax exemption of government-owned or controlled corporations. Decide. (MIAA v CA)

Answer:
MIAA is not a government-owned or controlled corporation but an instrumentality of the National
Government and thus exempt from local taxation.
MIAA is a government instrumentality vested with corporate powers to perform efficiently its
governmental functions. MIAA is like any other government instrumentality, the only difference is that
MIAA is vested with corporate powers. When the law vests in a government instrumentality corporate
powers, the instrumentality does not become a corporation.

3 Appellant insists that the complaint states a sufficient cause of action because the subject matter of
the controversy is one of common interest to the members of the corporation who are so numerous
that the present complaint should be treated as a class suit. (Sulo ng Bayan v Araneta)

Answer:
In order that a class suit may prosper, the following requisites must be present:
(1) That the subject matter of the controversy is one of common or general interest to many persons;
and
(2) That the parties are so numerous that it is impracticable to bring them all before the court.
Here, there is only one party plaintiff, and the corporation does not even have an interest in the subject
matter of the controversy, and cannot, therefore, represent its members or stockholders who claim to
own in their individual capacities ownership of the said property. Moreover, a class suit does not lie in
actions for the recovery of property where several persons claim partnership of their respective portions
of the property, as each one could alleged and prove his respective right in a different way for each
portion of the land, so that they cannot all be held to have identical title through
acquisition/prescription.
4 BASECO xx contends that its right against self-incrimination xx had been transgressed by the Order of
April 18, 1986 which required it "to produce corporate records from 1973 to 1986 under pain of
contempt of the Commission if it fails to do so." (Bataan Shipyard v PCGG)

Answer:
BASECO’S contention is not correct.
It is a fundamental rule that the right against self-incrimination has no application to juridical persons.
The corporation is a creature of the state. It is presumed to be incorporated for the benefit of the public.
It received certain special privileges and franchises, and holds them subject to the laws of the state and
the limitations of its charter. Its rights to act as a corporation are only preserved to it so long as it obeys
the laws of its creation. Thus, having all the limits of its powers set by law, the legislature has reserve the
right to question whether a corporation is following its charter.

5 Private respondents contend that petitioner Posadas surreptitiously formed Luxuria Homes, Inc., and
transferred the subject parcel of land to it to evade payment and defraud creditors, including private
respondents. RULE whether Luxuria Homes, Inc., was a party to the transactions entered into by
petitioner Posadas and private respondents and thus could be held jointly and severally with petitioner
Posadas. (Luxuria Homes v CA)

Answer:
Luxuria Homes, Inc. was not a party to the transactions entered into by Posadas and therefore cannot be
held jointly and severally liable.
Since private respondents failed to show that Luxuria Homes, Inc., was a party to any of the supposed
transactions, not even to the agreement to negotiate with and relocate the squatters, it cannot be held
liable, nay jointly and in solidum, to pay private respondents. In this case since it was petitioner Posadas
who contracted with the private respondent to render the subject services, only she is liable to pay the
amounts charged herein.

6 RESOLVE whether the National Labor Relations Commission committed grave abuse of discretion when
it issued a "break-open order" to the sheriff to be enforced against personal property found in the
premises of petitioner's sister company. (Concept Builders v NLRC)

Answer:
The National Labor Relations Commission did not commit any grave abuse of discretion when it affirmed
the break-open order issued by the Labor Arbiter.
A corporation is an entity separate and distinct from its stockholders but when the notion of separate
juridical personality is used to defeat the labor laws the separate personality is disregarded or the veil of
corporate fiction is pierced.
Here, in order to evade the payment to private respondents of back wages and to bar their
reinstatement to their former positions the petitioner ceased its business operations. HPPS clearly is a
business conduit of Petitioner Corporation and its existence was done to avoid the financial liability that
was already attached to the corporation. Hence, because the corporate veil is pierced the break-open
order to be enforced against the personal property found in the premises of petitioner’s sister company
is valid.
7 Pantranco, on its part, filed a third-party complaint against Jose M. Villarama, alleging that Villarama
and the Corporation, are one and the same; that Villarama and/or the Corporation was disqualified from
operating the two certificates in question by virtue of the aforementioned agreement between said
Villarama and Pantranco, which stipulated that Villarama "shall not for a period of 10 years from the
date of this sale, apply for any TPU service identical or competing with the buyer.” (Villarey Transit v
Ferrer)

Answer:
The contention of Pantranco is correct that Villarama and/or the Corporation was disqualified from
operating the two certificates in question by virtue of the aforementioned agreement between said
Villarama and Pantranco, which stipulated that Villarama "shall not for a period of 10 years from the
date of this sale, apply for any TPU service identical or competing with the buyer.”
Pantranco bought the two certificates from Villarama and created such an agreement in order to
prevent the Seller Company to compete with the same business. If Seller purchase a new TPU service
identical with the buyer, the intention of the agreement will be discarded, as well as if the Seller
purchase an existing line.

8 On the question of its liability for attorney's fees owing to private respondent Gregorio Manuel,
petitioner argued that being a corporation, it should not be held liable therefor because these fees were
owed by the incorporators, directors and officers of the corporation in their personal capacity as heirs of
Benita Trinidad. (Francisco Motors v CA)

Answer:
The doctrine of piercing the corporate veil has no relevant application here.
The rationale behind piercing a corporation's identity in a given case is to remove the barrier between
the corporation from the persons comprising it to thwart the fraudulent and illegal schemes of those
who use the corporate personality as a shield for undertaking certain proscribed activities.
Here, incorporators, directors and officers of the corporation in their personal capacity incurred such
expenses and it was not the corporation perpetuating fraud or promoting injustice so as to be held liable
therefor by piercing its corporate veil.

9 Petitioners contend that both the appellate and trial courts erred in holding them liable for the
obligations incurred by BEC through the application of the doctrine of piercing the veil of corporate
fiction absent any clear showing of fraud on their part. (Lipat v Pacific Banking)

Answer:
The spouses' attempt to isolate themselves from and hide behind the corporate personality of BEC so as
to evade their liabilities to Pacific Bank is precisely what the classical doctrine of piercing the veil of
corporate entity seeks to prevent and remedy. BEC is a mere continuation and successor of BET, and the
Lipat spouses cannot evade their obligations in the mortgage contract secured under the name of BEC
on the pretext that it was signed for the benefit and under the name of BET.
The evidence on record shows BET and BEC are not separate business entities and therefore the
appellate and trial courts did not erred in holding them liable for the obligations incurred by BEC
through the application of piercing the veil of corporate fiction.

10 One Man corporation -