PABALAN VS NLRC

FACTS:
On October 20, 1987, eighty-four (84) workers of the Philippine Inter-Fashion, Inc.
(PIF) filed a complaint against the latter for illegal transfer simultaneous with
illegal dismissal without justifiable cause and in violation of the provision of the
Labor Code on security of tenure as well as the provisions of Batas Pambansa Blg.
130. Complainants demanded reinstatement with full backwages, living
allowance, 13th month pay and other benefits under existing laws and/or
separation pay.
On October 21, 1987, PIF, through its General Manager, was notified about the
complaint and summons for the hearing set for November 6, 1987. The hearing
was re-set for November 27, 1987 for failure of respondents to appear. On
November 30, 1987 respondents (petitioners herein) moved for the cancellation of
the hearing scheduled on November 6, 1987 so that they could engage a counsel
to properly represent them preferably on November 17, 1987.
On December 10, 1987 both parties were directed to submit their respective
position papers within ten (10) days. By mutual agreement the hearing was re-set
on December 21, 1987 but on said date respondents and/or counsel failed to
appear. The hearing was re-set on January 14, 1988 on which date respondents
were given a deadline to submit their position paper.
On January 4, 1988 complainants filed their position paper. On January 14, 1988
counsel for respondents moved that he be given until January 22, 1988 to file
their position paper. The labor arbiter granted the motion. The PIF filed its position
paper on January 22, 1988. The heating for February 17, 1988 was re-set to March
9, 1988 and on March 29, 1988 on which dates respondents failed to appear.
On May 5, 1988, with leave of the labor arbiter, complainants filed their
supplemental position paper impleading the petitioners as officers of the PIF in
the complaint for their illegal transfer to a new firm. Court ruled against petitioner.
ISSUE:
Petitioners contend however that under the circumstances of the case as officers
of the corporation PIF they could not be jointly and severally held liable with the
corporation for its liability in this case.
HELD:
The settled rule is that the corporation is vested by law with a personality
separate and distinct from the persons composing it, including its officers as well
as from that of any other legal entity to which it may be related. Thus, a company
manager acting in good faith within the scope of his authority in terminating the
services of certain employees cannot be held personally liable for damages. 2
Mere ownership by a single stockholder or by another corporation of all or nearly
all capital stocks of the corporation is not by itself sufficient ground for
disregarding the separate corporate personality. 3
As a general rule, officers of a corporation are not personally liable for their official
acts unless it is shown that they have exceeded their authority.
In this particular case complainants did not allege or show that petitioners, as
officers of the corporation deliberately and maliciously designed to evade the
financial obligation of the corporation to its employees, or used the transfer of the
employees as a means to perpetrate an illegal act or as a vehicle for the evasion

of existing obligations, the circumvention of statutes, or to confuse the legitimate

issues.
Indeed, in the questioned resolution of the NLRC dated June 30, 1989 there is no
finding as to why petitioners were being held jointly and severally liable for the
liability and obligation of the corporation except as to invocation of the ruling of
this Court in A.C. Ransom Labor Union-CCLU vs. NLRC 6 in that the liability in the
cases of illegal termination of employees extends not only to the corporation as a
corporate entity but also to its responsible officers acting in the interest of the
corporation or employer.
It must be noted, however, that A.C. Ransom Labor Union-CCLU vs. NLRC the
corporation was a family corporation and that during the strike the members of
the family organized another corporation which was the Rosario Industrial
Corporation to which all the assets of the A.C. Ransom Corporation were
transferred to continue its business which acts of such officers and agents of A.C.
Ransom Corporation were intended to avoid payment of its obligations to its
employees. In such case this Court considered the president of the corporation to
be personally liable together with the corporation for the satisfaction of the claim
of the employees. 7
Not one of the above circumstances has been shown to be present. Hence
petitioners can not be held jointly and severally liable with the PIF corporation
under the questioned decision and resolution of the public respondent.
DEL ROSARIO VS NLRC
FACTS:
In POEA case no. 85-06-0394, the Philippine Overseas Employment Administration
(POEA) promulgated a decision on February 4,1986 dismissing the complaint for
money claims for lack of merit. The decision was appealed to the NLRC, which on
April 30, 1987 reversed the POEA decision and ordered Philsa Construction and
Trading Co.Ind and Ariel Enterprises (the foreign employer) to jointly and severally
pay private respondent the peso equivalent of $16,039,000 salary differentials
and $2,420.03 as vacation leave benefits. A writ of execution was issued by the
POEA but it was returned unsatisfied incapable of satisfying the judgement.
Private respondent moved for the issuance of an alias writ against the officers of
Philsa. This motion was opposed by the officers led by petitioners, the president
and general manager of the corporation. However, POEA issued a resolution
ordering the sheriff to execute against the properties of the petitioner and if
insufficient, against the cash and/or surety bond of bonding company concerned
for the full satisfaction of the judgement awarded.
ISSUE:
Whether or not the POEA resolution is proper.
HELD:
No. Under the law, a corporation is bestowed juridical personality, separate and
distinct from its stockholders. But when the juridical personality of the corporation
is used to defeat public convenience, justify wrong, protect or defend crime, the
corporation shall be considered as a mere association of persons and its
responsible officers and/or stockholders shall be individually liable. For the same
reasons, a corporation shall be liable for obligations of a stockholder or a
corporation and its successor-in-interest shall be considered as one and the
liability of the former shall attach to the latter.

But for the separate juridical personality of a corporation to be disregarded, the

wrong doing must be clearly and convincingly established. It cannot be presumed.
Thus, at the time Philsa allowed its license to lapse in 1985 and even at the time it
was delivered in 1986, there was yet no judgement in favor of private respondent.
An intent to evade payment of his claims cannot therefore be implied from the
expiration of Philas license and its delisting.
Neither will the organization of Philsa International Placement and Services Corp.
and its registration with the POEA as a private employment agency imply fraud
since it was organized and registered in 1981, several years before private
respondent filed his complaint with the POEA in 1985. The creation of the second
anticipation of private respondents money claims and the consequent adverse
judgement against Philsa.
Likewise, substantially identity of the incorporators of the two corporations does
not necessarily imply fraud.
VILLA REY TRANSIT VS FERRER
Facts:
[preceding case] Prior to 1959, Jose M. Villarama was an operator of a bus
transportation, under the business name of Villa Rey Transit, pursuant to
certificates of public convenience granted him by the Public Service Commission
(PSC) in Cases 44213 and 104651, which authorized him to operate a total of 32
units on various routes or lines from Pangasinan to Manila, and vice-versa. On 8
January 1959, he sold the two certificates of public convenience to the Pangasinan
Transportation Company, Inc. (Pantranco), for P350,000.00 with the condition,
among others, that the seller (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."
Barely 3 months thereafter, or on 6 March 1959: a corporation called Villa Rey
Transit, Inc. (the Corporation) was organized with a capital stock of P500,000.00
divided into 5,000 shares of the par value of P100.00 each; P200,000.00 was the
subscribed stock; Natividad R. Villarama (wife of Jose M. Villarama) was one of the
incorporators, and she subscribed for P1,000.00; the balance of P199,000.00 was
subscribed by the brother and sister-in-law of Jose M. Villarama; of the subscribed
capital stock, P105,000.00 was paid to the treasurer of the corporation, who was
Natividad R. Villarama. In less than a month after its registration with the
Securities and Exchange Commission (10 March 1959), the Corporation, on 7 April
1959, bought 5 certificates of public convenience, 49 buses, tools and equipment
from one Valentin Fernando, for the sum of P249,000.00, of which P100,000.00
was paid upon the signing of the contract; P50,000.00 was payable upon the final
approval of the sale by the PSC; P49,500.00 one year after the final approval of
the sale; and the balance of P50,000.00 "shall be paid by the BUYER to the
different suppliers of the SELLER."
The very same day that the contract of sale was executed, the parties thereto
immediately applied with the PSC for its approval, with a prayer for the issuance
of a provisional authority in favor of the vendee Corporation to operate the service
therein involved. On 19 May 1959, the PSC granted the provisional permit prayed
for, upon the condition that "it may be modified or revoked by the Commission at
any time, shall be subject to whatever action that may be taken on the basic
application and shall be valid only during the pendency of said application."
Before the PSC could take final action on said application for approval of sale,
however, the Sheriff of Manila, on 7 July 1959, levied on 2 of the five certificates
of public convenience involved therein, namely, those issued under PSC cases

59494 and 63780, pursuant to a writ of execution issued by the Court of First
Instance of Pangasinan in Civil Case 13798, in favor of Eusebio E. Ferrer against
Valentin Fernando. The Sheriff made and entered the levy in the records of the
PSC. On 16 July 1959, a public sale was conducted by the Sheriff of the said two
certificates of public convenience. Ferrer was the highest bidder, and a certificate
of sale was issued in his name. Thereafter, Ferrer sold the two certificates of
public convenience to Pantranco, and jointly submitted for approval their
corresponding contract of sale to the PSC. Pantranco therein prayed that it be
authorized provisionally to operate the service involved in the said two
certificates.
The applications for approval of sale, filed before the PSC, by Fernando and the
Corporation, Case 124057, and that of Ferrer and Pantranco, Case 126278, were
scheduled for a joint hearing. In the meantime, to wit, on 22 July 1959, the PSC
issued an order disposing that during the pendency of the cases and before a final
resolution on the aforesaid applications, the Pantranco shall be the one to operate
provisionally the service under the two certificates embraced in the contract
between Ferrer and Pantranco. The Corporation took issue with this particular
ruling of the PSC and elevated the matter to the Supreme Court, which decreed,
after deliberation, that until the issue on the ownership of the disputed certificates
shall have been finally settled by the proper court, the Corporation should be the
one to operate the lines provisionally.
[present case] On 4 November 1959, the Corporation filed in the Court of First
Instance of Manila, a complaint for the annulment of the sheriff's sale of the
aforesaid two certificates of public convenience (PSC Cases 59494 and 63780) in
favor of Ferrer, and the subsequent sale thereof by the latter to Pantranco, against
Ferrer, Pantranco and the PSC. The Corporation prayed therein that all the orders
of the PSC relative to the parties' dispute over the said certificates be annulled.
The CFI of Manila declared the sheriff's sale of two certificates of public
convenience in favor of Ferrer and the subsequent sale thereof by the latter to
Pantranco null and void; declared the Corporation to be the lawful owner of the
said certificates of public convenience; and ordered Ferrer and Pantranco, jointly
and severally, to pay the Corporation, the sum of P5,000.00 as and for attorney's
fees. The case against the PSC was dismissed. All parties appealed.
Issue:
Whether the stipulation, "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" in the contract between Villarama and Pantranco, binds the
Corporation (the Villa Rey Transit, Inc.).
Held:
Villarama supplied the organization expenses and the assets of the Corporation,
such as trucks and equipment; there was no actual payment by the original
subscribers of the amounts of P95,000.00 and P100,000.00 as appearing in the
books; Villarama made use of the money of the Corporation and deposited them
to his private accounts; and the Corporation paid his personal accounts. Villarama
himself admitted that he mingled the corporate funds with his own money. These
circumstances are strong persuasive evidence showing that Villarama has been
too much involved in the affairs of the Corporation to altogether negative the
claim that he was only a part-time general manager. They show beyond doubt
that the Corporation is his alter ego. The interference of Villarama in the complex
affairs of the corporation, and particularly its finances, are much too inconsistent
with the ends and purposes of the Corporation law, which, precisely, seeks to
separate personal responsibilities from corporate undertakings. It is the very
essence of incorporation that the acts and conduct of the corporation be carried

out in its own corporate name because it has its own personality. The doctrine
that a corporation is a legal entity distinct and separate from the members and
stockholders who compose it is recognized and respected in all cases which are
within reason and the law. When the fiction is urged as a means of perpetrating a
fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the
circumvention of statutes, the achievement or perfection of a monopoly or
generally the perpetration of knavery or crime, the veil with which the law covers
and isolates the corporation from the members or stockholders who compose it
will be lifted to allow for its consideration merely as an aggregation of individuals.
Hence, the Villa Rey Transit, Inc. is an alter ego of Jose M. Villarama, and that the
restrictive clause in the contract entered into by the latter and Pantranco is also
enforceable and binding against the said Corporation. For the rule is that a seller
or promisor may not make use of a corporate entity as a means of evading the
obligation of his covenant. Where the Corporation is substantially the alter ego of
the covenantor to the restrictive agreement, it can be enjoined from competing
with the covenantee.
ARNOLD VS WILLITS AND PATTERRSON
FACTS:

916. The Firm Willits & Patterson in San Francisco entered into a contract with Arnold whereby
Arnold was to be employed for a period of five years as the agent of the firm here in the PI to
operate an oil mill for which he was to receive a minimum salary of $200/mth, a 1% brokerage
fee from all purchases and sales of merchandise, and half of the profits of the oil business and

other businesses. provided if the business was at a loss, Arnold would receive $400/mth.
Later, Patterson retired and Willits acquired all interests of the business.
Willits organized a new Corp in San Francisco which took over and acquired all assets of the
Firm Willits & Patterson. Willits was the owner of all the capital stock. New corp had the same

name.
After, Willits, organized a new Corporation here in the PI to take over all the business and

assets of the firm here in the PI. Willits was the owner of all the capital stock.
Later, there was dispute with regard to the construction of the contract as a result, a new

contract in the form of a letter was entered into. Willits signed this.
The statements of account showed that 106K was due and owing to Arnold.
W&P Corp was in financial trouble and all assets were turned over to a creditors committee.
1922. Arnold filed this complaint to recover 106K from W&P.
W&P argues that the 2nd contract was signed without authority. And as counterclaim alleged

that Arnold took 30K from the Corp but only 19.1K was due to him thus he owed 10.1K to W&P.
CFI ordered Arnold to return the 10.1K.

ISSUE:

HELD:
The controversy first arose after the corporation was in financial trouble and the
appointment of what is known in the record as a "creditors' committee." There is
no claim or pretense that there was any fraud or collusion between plaintiff and
Willits, and it is very apparent that Exhibit B was to the mutual interest of both
parties. It is elementary law that if Exhibit B is a binding contract between the
plaintiff and Willits and the corporations, it is equally binding upon the creditors'
committee. It would not have any higher or better legal right than the corporation
itself, and could not make any defense which it could not make. It is very
significant that the claim or defense which is now interposed by the creditors'

committee was never made or asserted at any previous time by the defendant,
and that it never was made by Willits, and it is very apparent that if he had
remained in control of the corporation, it would never have made the defense
which is now made by the creditors' committee. The record is conclusive that at
the time he signed Exhibit B, Willits was, in legal effect, the owner and holder of
all the stock in both corporations, and that he approved it in their interest, and to
protect them from the plaintiff having and making a much larger claim under
Exhibit A. As a matter of fact, it appears from the statement of Mr. Larkin, the
accountant, in the record that if plaintiff's cause of action was now founded upon
Exhibit A, he would have a claim for more than P160,000.
Thompson on Corporations, 2d ed., vol. I, section 10, says:
The proposition that a corporation has an existence separate and distinct from its
membership has its limitations. It must be noted that this separate existence is for
particular purposes. It must also be remembered that there can be no corporate
existence without persons to compose it; there can be no association without
associates. This separate existence is to a certain extent a legal fiction. Whenever
necessary for the interests of the public or for the protection or enforcement of
the rights of the membership, courts will disregard this legal fiction and operate
upon both the corporation and the persons composing it.
In the same section, the author quotes from a decision in 49 Ohio State, 1371; 15
L. R. A., 145, in which the Supreme Court of Ohio says:
"So long as a proper use is made of the fiction that a corporation is an entity apart
from its shareholders, it is harmless, and, because convenient, should not be
called in question; but where it is urged to an end subversive of its policy, or such
is the issue, the fiction must be ignored, and the question determined whether the
act in question, though done by shareholders, that is to say, by the persons
uniting in one body, was done simply as individuals, and with respect to their
individual interest as shareholders, or was done ostensibly as such, but, as a
matter of fact, to control the corporation, and affect the transaction of its
business, in the same manner as if the act had been clothed with all the
formalities of a corporate act. This must be so, because, the stockholders having a
dual capacity, and capable of acting in either, and a possible interest to conceal
their character when acting in their corporate capacity, the absence of the formal
evidence of the character of the act cannot preclude judicial inquiry on the
subject. If it were otherwise, then in that department of the law fraud would enjoy
an immunity awarded to it in no other."
Where the stock of a corporation is owned by one person whereby the corporation
functions only for the benefit of such individual owner, the corporation and the
individual should be deemed to be the same.
LA CAMPANA COFFEE VS KAISAHAN
FACTS:
Tan Tong, one of the herein petitioners, has since 1932 been engaged in the
business of buying and selling gaugau under the trade name La Campana Gaugau
Packing with an establishment in Binondo, Manila, which was later transferred to
Espaa Extension, Quezon City. But on July 6, 1950, Tan Tong, with himself and
members of his family corporation known as La Campana Factory Co., Inc., with its
principal office located in the same place as that of La Campana Gaugau Packing.
About a year before the formation of the corporation, or on July 11, 1949, Tan Tong
had entered into a collective bargaining agreement with the Philippine Legion of
Organized Workers, known as PLOW for short, to which the union of Tan Tong's

employees headed by Manuel E. Sadde was then affiliated. Seceding, however,

from the PLOW, Tan Tong's employees later formed their own organization known
as Kaisahan Ng Mga Manggagawa Sa La Campana, one of the herein respondents,
and applied for registration in the Department of Labor as an independent entity.
Pending consideration of this application, the Department gave the new
organization legal standing by issuing it a permit as an affiliate to the Kalipunan
Ng Mga Manggagawa.
On July 19, 1951, the Kaisahan Ng Mga Manggagawa Sa La Campana, hereinafter
to be referred to as the respondent Kaisahan, which, as of that date, counted with
66 members workers all of them of both La Campana Gaugau Packing and La
Campana Coffee Factory Co., Inc. presented a demand for higher wages and
more privileges, the demand being addressed to La Campana Starch and Coffee
Factory, by which name they sought to designate, so it appears, the La Campana
Gaugau Packing and the La Campana Coffee Factory Co., Inc. As the demand was
not granted and an attempt at settlement through the mediation of the
Conciliation Service of the Department of Labor had given no result, the said
Department certified the dispute to the Court of Industrial Relations on July 17,
1951, the case being there docketed as Case No. 584-V.
With the case already pending in the industrial court, the Secretary of Labor, on
September 5, 1951, revoked the Kalipunan Ng Mga Kaisahang Manggagawa's
permit as a labor union on the strength of information received that it was
dominated by subversive elements, and, in consequence, on the 20th of the same
month, also suspended the permit of its affiliate, the respondent Kaisahan.
We have it from the court's order of January 15, 1952, which forms one of the
annexes to the present petition, that following the revocation of the Kaisahan's
permit, "La Campana Gaugau and Coffee Factory" (obviously the combined name
of La Campana Gaugau Packing and La Campana Coffee Factory Co., Inc,) and the
PLOW, which had been allowed to intervene as a party having an interest in the
dispute, filed separate motions for the dismissal of the case
ISSUE:
HELD:
As to the first ground, petitioners obviously do not question the fact that the
number of employees of the La Campana Gaugau Packing involved in the case is
more than the jurisdictional number (31) required bylaw, but they do contend that
the industrial court has no jurisdiction to try the case as against La Campana
Coffee Factory, Inc. because the latter has allegedly only 14 laborers and only of
these are members of the respondent Kaisahan. This contention loses force when
it is noted that, as found by the industrial court and this finding is conclusive
upon us La Campana Gaugau Packing and La Campana Coffee Factory Co. Inc.,
are operating under one single management, that is, as one business though with
two trade names. True, the coffee factory is a corporation and, by legal fiction, an
entity existing separate and apart fro the persons composing it, that is, Tan Tong
and his family. But it is settled that this fiction of law, which has been introduced
as a matter of convenience and to subserve the ends of justice cannot be invoked
to further an end subversive of that purpose.
Disregarding Corporate Entity. The doctrine that a corporation is a legal entity
existing separate and apart from the person composing it is a legal theory
introduced for purposes of convenience and to subserve the ends of justice. The
concept cannot, therefore, be extended to a point beyond its reason and policy,
and when invoked in support of an end subversive of this policy, will be
disregarded by the courts. Thus, in an appropriate case and in furtherance of the
ends of justice, a corporation and the individual or individuals owning all its stocks

and assets will be treated as identical, the corporate entity being disregarded
where used as a cloak or cover for fraud or illegality. (13 Am. Jur., 160-161.)
. . . A subsidiary or auxiliary corporation which is created by a parent corporation
merely as an agency for the latter may sometimes be regarded as identical with
the parent corporation, especially if the stockholders or officers of the two
corporations are substantially the same or their system of operation unified. (Ibid.
162; see Annotation 1 A. L. R. 612, s. 34 A. L. R. 599.)
In the present case Tan Tong appears to be the owner of the gaugau factory. And
the coffee factory, though an incorporated business, is in reality owned
exclusively by Tan Tong and his family. As found by the Court of industrial
Relations, the two factories have but one office, one management and one
payroll, except after July 17, the day the case was certified to the Court of
Industrial Relations, when the person who was discharging the office of cashier for
both branches of the business began preparing separate payrolls for the two. And
above all, it should not be overlooked that, as also found by the industrial court,
the laborers of the gaugau factory and the coffee factory were interchangeable,
that is, the laborers from the gaugau factory were sometimes transferred to the
coffee factory and vice-versa. In view of all these, the attempt to make the two
factories appears as two separate businesses, when in reality they are but one, is
but a device to defeat the ends of the law (the Act governing capital and labor
relations) and should not be permitted to prevail.
YUTIVO SONS HARDWARE VS CTA
FACTS:
Yutivo, a domestic corporation incorporated in 1916 under Philippine laws, was
engaged in the importation and sale of hardware supplies and equipment. After
the first world war, it resumed its business and bought a number of cars and
trucks from General Motors(GM), an American Corporation licensed to do business
in the Philippines.
On June 13, 1946, the Southern Motors Inc,(SM) was organized to engage in the
business of selling cars, trucks and spare parts. One of the subscribers of stocks
during its incorporation was Yu Khe Thai, Yu Khe Siong and Hu Kho Jin, who are
sons of Yu Tiong Yee, one of Yutivos founders.
After SMs incorporation and until the withdrawal of GM from the Philippines, the
cars and trucks purchased by Yutivo from GM were sold by Yutivo to SM which the
latter sold to the public.
Yutivo was appointed importer for Visayas and Mindanao by the US manufacturer
of cars and trucks sold by GM. Yutivo paid the sales tax prescribed on the basis of
selling price to SM. SM paid no sales tax on its sales to the public.
An assessment was made upon Yutivo for deficiency sales tax. The Collector of
Internal Revenue, contends that the taxable sales were the retail sales by SM to
the public and not the sales at wholesale made by Yutivo to the latter inasmuch as
SM and Yutivo were one and the same corporation, the former being a subsidiary
of the latter.
The assessment was disputed by petitioner. After reinvestigation, a second
assessment was made, sustaining the validity of the first assessment. Yutivo
contested the second assessment, alleging that there is no valid ground to
disregard the corporate personality of SM and to hold that it is an adjunct of
petitioner.

ISSUE:
Whether or not the corporate personality of SM could be disregarded.
HELD:
Yes. A corporation is an entity separate and distinct from its stockholders and from
other corporations to which it may be connected. However, when the notion of
legal entity 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 a
mere alter ego or business conduit of a person, it may be disregarded.
SC ruled that CTA was not justified in finding that SM was organized to defraud the
Government. SM was organized in June 1946, from that date until June 30, 1947,
GM was the importer of the cars and trucks sold to Yutivo, which in turn was sold
to SM. GM, as importer was the one solely liable for sales taxes. Neither Yutivo nor
SM was subject to the sales taxes. Yutivos liability arose only until July 1, 1947
when it became the importer. Hence, there was no tax to evade.
However, SC agreed with the respondent court that SM was actually owned and
controlled by petitioner. Consideration of various circumstances indicate that
Yutivo treated SM merely as its department or adjunct:
a. The founders of the corporation are closely related to each other by blood and
affinity.
b. The object and purpose of the business is the same; both are engaged in sale
of vehicles, spare parts, hardware supplies and equipment.
c. The accounting system maintained by Yutivo shows that it maintained high
degree of control over SM accounts.
d. Several correspondences have reference to Yutivo as the head office of SM. SM
may even freely use forms or stationery of Yutivo.
e. All cash collections of SMs branches are remitted directly to Yutivo.
f. The controlling majority of the Board of Directors of Yutivo is also the controlling
majority of SM.
g. The principal officers of both corporations are identical. Both corporations have
a common comptroller in the person of Simeon Sy, who is a brother-in-law of
Yutivos president, Yu Khe Thai.
h. Yutivo, financed principally the business of SM and actually extended all the
credit to the latter not only in the form of starting capital but also in the form of
credits extended for the cars and vehicles allegedly sold by Yutivo to SM.
LIDDEL VS CIR
FACTS:
The petitioner, Liddell & Co. Inc., (Liddell & Co. for short) is a domestic corporation
establish in the Philippines on February 1, 1946, with an authorized capital of
P100,000 divided into 1000 share at P100 each. Of this authorized capital, 196
shares valued at P19,600 were subscribed and paid by Frank Liddell while the
other four shares were in the name of Charles Kurz, E.J. Darras, Angel Manzano
and Julian Serrano at one shares each. Its purpose was to engage in the business

of importing and retailing Oldsmobile and Chevrolet passenger cars and GMC and
Chevrolet trucks..
On January 31, 1947, with the limited paid-in capital of P20,000, Liddell & Co. was
able to declare a 90% stock dividend after which declaration on, Frank Liddells
holding in the Company increased to 1,960 shares and the employees, Charles
Kurz E.J. Darras, Angel Manzano and Julian Serrano at 10 share each. The
declaration of stock dividend was followed by a resolution increasing the
authorized capital of the company to P1,000.000 which the Securities & Exchange
Commission approved on March 3, 1947. Upon such approval, Frank Liddell
subscribed to 3,000 additional shares, for which he paid into the corporation
P300,000 so that he had in his own name 4,960 shares.
On May 24, 1957, Frank Liddell, on one hand and Messrs. Kurz, Darras, Manzano
and Serrano on the other, executed an agreement (Exhibit A) which was further
supplemented by two other agreements (Exhibits B and C) dated May 24, 1947
and June 3, 1948, wherein Frank Liddell transferred (On June 7, 1948) to various
employees of Liddell & Co. shares of stock.
At the annual meeting of stockholders of Liddell & Co. held on March 9, 1948, a
100% stock dividend was declared, thereby increasing the issued capital stock of
aid corporation from P1,000.000 to P 3,000,000 which increase was duly approved
by the Securities and Exchange Commission on June 7, 1948. Frank Liddell
subscribed to and paid 20% of the increase of P400,000. He paid 25% thereof in
the amount of P100,000 and the balance of P3,000,000 was merely debited to
Frank Liddell-Drawing Account and credited to Subscribed Capital Stock on
December 11, 1948.
ISSUE:
whether or not Liddell Motors, Inc. is the alter ego of Liddell & Co. Inc
HELD:
we are fully convinced that Liddell & Co. is wholly owned by Frank Liddell. As of
the time of its organization, 98% of the capital stock belonged to Frank Liddell.
The 20% paid-up subscription with which the company began its business was
paid by him. The subsequent subscriptions to the capital stock were made by him
and paid with his own money.
These stipulations and conditions appear in Exhibit A: (1) that Frank Liddell had
the authority to designate in the future the employee who could receive earnings
of the corporation; to apportion among the stock holders the share in the profits;
(2) that all certificates of stock in the names of the employees should be
deposited with Frank Liddell duly indorsed in blank by the employees concerned;
(3) that each employee was required to sign an agreement with the corporation to
the effect that, upon his death or upon his retirement or separation for any cause
whatsoever from the corporation, the said corporation should, within a period of
sixty days therefor, have the absolute and exclusive option to purchase and
acquire the whole of the stock interest of the employees so dying, resigning,
retiring or separating.
These stipulations in our opinion attest to the fact that Frank Liddell also owned it.
He supplied the original his complete control over the corporation.
As to Liddell Motors, Inc. we are fully persuaded that Frank Liddell also owned it.
He supplied the original capital funds.6 It is not proven that his wife Irene,
ostensibly the sole incorporator of Liddell Motors, Inc. had money of her own to
pay for her P20,000 initial subscription.7 Her income in the United States in the

years 1943 and 1944 and the savings therefrom could not be enough to cover the
amount of subscription, much less to operate an expensive trade like the retail of
motor vehicles. The alleged sale of her property in Oregon might have been true,
but the money received therefrom was never shown to have been saved or
deposited so as to be still available at the time of the organization of the Liddell
Motors, Inc.
The evidence at hand also shows that Irene Liddell had scant participation in the
affairs of Liddell Motors, Inc. She could hardly be said to possess business
experience. The income tax forms record no independent income of her own. As a
matter of fact, the checks that represented her salary and bonus from Liddell
Motors, Inc. found their way into the personal account of Frank Liddell. Her
frequent absences from the country negate any active participation in the affairs
of the Motors company.
There are quite a series of conspicuous circumstances that militate against the
separate and distinct personality of Liddell Motors, Inc. from Liddell & Co.8 We
notice that the bulk of the business of Liddell & Co. was channeled through Liddell
Motors, Inc. On the other hand, Liddell Motors, Inc. pursued no activities except to
secure cars, trucks, and spare parts from Liddell & Co. Inc. and then sell them to
the general public. These sales of vehicles by Liddell & Co. to Liddell Motors, Inc.
for the most part were shown to have taken place on the same day that Liddell
Motors, Inc. sold such vehicles to the public. We may even say that the cars and
trucks merely touched the hands of Liddell Motors, Inc. as a matter of formality.
During the first six months of 1949, Liddell & Co. issued ten (10) checks payable
to Frank Liddell which were deposited by Frank Liddell in his personal account with
the Philippine National Bank. During this time also, he issued in favor of Liddell
Motors, Inc. six (6) checks drawn against his personal account with the same
bank. The checks issued by Frank Liddell to the Liddell Motors, Inc. were
significantly for the most part issued on the same day when Liddell & Co. Inc.
issued the checks for Frank Liddell9 and for the same amounts.
It is of course accepted that the mere fact that one or more corporations are
owned and controlled by a single stockholder is not of itself sufficient ground for
disregarding separate corporate entities. Authorities10 support the rule that it is
lawful to obtain a corporation charter, even with a single substantial stockholder,
to engage in a specific activity, and such activity may co-exist with other private
activities of the stockholder. If the corporation is a substantial one, conducted
lawfully and without fraud on another, its separate identity is to be respected.
Accordingly, the mere fact that Liddell & Co. and Liddell Motors, Inc. are
corporations owned and controlled by Frank Liddell directly or indirectly is not by
itself sufficient to justify the disregard of the separate corporate identity of one
from the other. There is, however, in this instant case, a peculiar consequence of
the organization and activities of Liddell Motors, Inc.
As opined in the case of Gregory v. Helvering,12 "the legal right of a taxpayer to
decrease the amount of what otherwise would be his taxes, or altogether avoid
them by means which the law permits, cannot be doubted." But, as held in
another case,13 "where a corporation is a dummy, is unreal or a sham and serves
no business purpose and is intended only as a blind, the corporate form may be
ignored for the law cannot countenance a form that is bald and a mischievous
fiction."
Consistently with this view, the United States Supreme Court14 held that "a
taxpayer may gain advantage of doing business thru a corporation if he pleases,
but the revenue officers in proper cases, may disregard the separate corporate
entity where it serves but as a shield for tax evasion and treat the person who

actually may take the benefits of the transactions as the person accordingly
taxable."
Thus, we repeat: to allow a taxpayer to deny tax liability on the ground that the
sales were made through an other and distinct corporation when it is proved that
the latter is virtually owned by the former or that they are practically one and the
same is to sanction a circumvention of our tax laws.
RAMIREZ TELEPHONE VS BANK OF AMERICA
FACTS:
This is a petition for review on certiorari of a decision of the Court of Appeals of
February 27, 1964, wherein the judgment of the lower court was reversed and
another entered dismissing the complaint of plaintiff, now petitioner, Ramirez
Telephone Corporation, and ordering it to pay to defendant, now respondent, Bank
of America, the sum of P500.00 and to the third-party defendant E.F. Herbosa,
now likewise respondent, the same amount, both in the concept of attorney's
fees, the costs being adjudged likewise against petitioner. The judgment of the
Court of First Instance which was reversed by the Court of Appeals reads as
follows:1
In view of the foregoing considerations, judgment is hereby rendered in favor of
the plaintiff and against the defendant Bank of America ordering the latter to pay
the former the sum of P3,000.00 in the form of actual damages, and to pay the
costs of these proceedings.
Likewise, judgment is hereby rendered sentencing the third-party defendant, E.F.
Herbosa, to indemnify or reimburse the third-party plaintiff, Bank of America, any
sum or sums which the latter may pay the plaintiff by virtue of this judgment.
The third-party complaint against the Sheriff of Manila as well as the counterclaim
of defendant Bank of America and third-party defendant E.F. Herbosa are hereby
ordered dismissed.
ISSUE:
The Court of Appeals erred in not applying the settled legal principle that a
corporation has a personality separate and distinct from that of its stockholders
and, therefore, the funds of a corporation cannot be reached to satisfy the debt of
its stockholders.
HELD:
Petitioner's main grievance in the first assigned error is that the Court of Appeals
disregarded its corporate personality; it relies on the general principle "that the
corporate entity will not be disregarded no matter how large the holding a
particular stockholder may have in the corporation." 5 Petitioner would thus
maintain that the personality as an entity separate and distinct from its major
stockholders, Ruben R. Ramirez and his wife, was not to be disregarded even if
they did own 75% of the stock of the corporation. 6 The conclusion that would
thus emerge, in petitioner's opinion, is that its funds as a corporation cannot be
garnished to satisfy the debts of a principal stockholder.
While respect for the corporate personality as such is the general rule, there are
exceptions. In appropriate cases, the veil of corporate fiction may be pierced.
From the facts as found which must remain undisturbed, this is such a case. This
assignment of error has no merit, in view of a number of cases decided by this
Court, the latest of which is Albert v. Court of First Instance 7 reaffirming a 1965

resolution in Albert v. University Publishing Co., Inc. 8 In that resolution, the

principle is restated thus: "Even with regard to corporations duly organized and
existing under the law, we have in many a case pierced the veil of corporate
fiction to administer the ends of justice." In support of the above principle, the
following cases were cited: Arnold vs. Willits & Patterson, Ltd., 44 Phil. 634; Koppel
(Phil.), Inc. vs. Yatco, 77 Phil. 496; La Campana Coffee Factory, Inc. vs. Kaisahan
ng mga Manggagawa sa La Campana, 93 Phil. 160; Marvel Building Corporation
vs. David, 94 Phil. 376; Madrigal Shipping Co., Inc. vs. Ogilvie, L-8431, Oct. 30,
1958; Laguna Transportation Co., Inc. vs. S.S.S., L-14606, April 28, 1960;
McConnel vs. C.A., L-10510, March 17, 1961; Liddel & Co., Inc. vs. Collector of
Internal Revenue, L-9687, June 30, 1961; Palacio vs. Fely Transportation Co., L15121, August 31, 1962. Hence, to repeat, the first assigned error cannot be
sustained.
GUATSON INTERNATIONAL VS NLRC
FACTS:
Petitioners Guatson Travel and Tours, Inc. (hereinafter referred to as Guatson
Travel), Philippine Integrated Labor Assistance Corp. (Philac) and Mercury Express
International Courier Services, Inc. (MEREX) assail the Decision, rendered by the
National Labor Relations Commission in Case No. NLRC-NCR-00-11-0451-88
entitled "Jolly M. Almoradie v. Guatson's Travel Company, Philac and MEREX,"
dated March 21, 1991 and its Resolution, dated May 31, 1991, denying the
petitioners' Motion for Reconsideration.
In the questioned decision, the NLRC found that Mr. Henry Ocier's (Vice-President
and General Manager of petitioner Guatson Travel) actuation of threatening and
forcing private respondent, Jolly M. Almoradie, to resign amounted to illegal
dismissal and thus ordered petitioners to pay private respondent backwages,
computed from the date of his dismissal on November 1988, until the decision
was rendered on February 28, 1991 or the amount of P50,328.00; and to pay
separation pay equivalent to one-half (1/2) month for every year of service, for
seven (7) years or the amount of P6,524.00.
From the records it appears that Jolly M. Almoradie was first employed by Mercury
Express International Courier Service, Inc. (MEREX) in October, 1983 as
Messenger receiving a monthly salary of P800.00. When it closed its operations,
Almoradie was absorbed by MEREX's sister company Philippine Integrated Labor
Assistance Corp. (Philac), likewise as Messenger with an increased salary of
P1,200.00.
In September, 1986, Almoradie was transferred to Guatson Travel, allegedly also a
sister company of MEREX and Philac, as Liaison Officer with a salary of P1,864.00.
Thereafter, he was promoted to the position of Sales Representative sometime in
April, 1988. On April 30, 1988, Almoradie was issued three separate memoranda
On May 4, 1988, Almoradie was reverted to the position of Messenger, yet
sometime in September, 1988, he was again given the position of Account
Executive, the nature of work of which is similar to that of a sales representative.
Almoradie accepted the transfer with the understanding that he will solely
discharge the duties of an account executive and will no longer be required to do
messengerial work.
In the morning of October 1, 1988, Almoradie was allegedly summoned by Henry
Ocier to his office and was there and then forced by the latter to resign. Ocier
taunted Almoradie with threats that it he will not resign, he will file charges
against him which would adversely affect his chances of getting employed in the

future. Ocier allegedly even provided the pen and paper on which Almoradie
wrote and signed the resignation letter dictated by Ocier himself. 5
On that same day, Almoradie sought the help of a friend, Isagani Mallari, who
advised him to report the matter to the Barangay Captain. 6 Subsequently,
Almoradie filed a complaint for illegal Dismissal on November 14, 1988. The Labor
Arbiter, however dismissed his case
ISSUE:
Anent NLRC's grant of separation pay and backwages to private respondent Jolly
M. Almoradie, petitioners argues that the companies, Guatson Travel Company,
Philac Merex have separate and distinct legal personalities such that the latter
companies should not be held liable; assuming, for the sake of argument that
private respondent was illegally dismissed.
HELD:
We uphold the NLRC. The three companies are owned by one family, such that
majority of the officers of the companies are the same. The companies are located
in one building and use the same messengerial service. Moreover, there was no
showing that private respondent was paid separation pay when he was absorbed
by Philac upon closure of Merex; nor was there evidence that he resigned from
Philac when he transferred to Guatson Travel. Under the doctrine of piercing the
veil of corporate fiction, when valid ground exists, the legal fiction that a
corporation is an entity with a juridical personality separate and distinct from its
members or stockholders may be disregarded. We have applied this doctrine in
the case of "Philippine Scout Veterans Security and Investigation Agency (PSVSIA),
et al. v. The Hon. Secretary of Labor," G.R. No. 92357, July 21, 1993.
Where there is a finding of illegal dismissal, the employee is entitled to both
reinstatement and award of backwages from the time the compensation was
withheld, in this case in 1988, up to a maximum of three years, applying the
Mercury Drug Rule. 11
Reinstatement, however, will not be required not only for the reason that it was
not prayed for by the respondent, but also because the relationship between
Almoradie and Ocier had become strained as to preclude a harmonious working
relationship. In lieu of reinstatement, separation pay is awarded. 12 As the term
suggests, separation pay is the amount that an employee receives at the time of
his severance from the service and is designed to provide the employee with the
wherewithal during the period that he is looking for another employment. 13
However the award of separation pay should be, as we have consistently ruled,
equivalent to one (1) month for every year of service, 14 instead of one-half (1/2)
month as awarded by the NLRC. In the computation of separation pay, the three
(3) year period wherein backwages are awarded, must be included.
CONCEPT BUILDERS VS NLRC
FACTS:
Concept Builders, Inc., (CBI) a domestic corporation, with principal office at 355
Maysan Road, Valenzuela, Metro Manila, is engaged in the construction business
while Norberto Marabe; Rodolfo Raquel, Cristobal Riego, Manuel Gillego, Palcronio
Giducos, Pedro Aboigar, Norberto Comendador, Rogelio Salut, Emilio Garcia, Jr.,
Mariano Rio, Paulina Basea, Alfredo Albera, Paquito Salut, Domingo Guarino,
Romeo Galve, Dominador Sabina, Felipe Radiana, Gavino Sualibio, Moreno
Escares, Ferdinand Torres, Felipe Basilan, and Ruben Robalos were employed by

said company as laborers, carpenters and riggers. On November 1981, Marabe,

et. al. were served individual written notices of termination of employment by CBI,
effective on 30 November 1981. It was stated in the individual notices that their
contracts of employment had expired and the project in which they were hired
had been completed. The National Labor Relations Commission (NLRC) found it to
be, the fact, however, that at the time of the termination of Marabe, et.al.'s
employment, the project in which they were hired had not yet been finished and
completed. CBI had to engage the services of sub-contractors whose workers
performed the functions of Marabe, et. al. Aggrieved, Marabe, et. al. filed a
complaint for illegal dismissal, unfair labor practice and non-payment of their
legal holiday pay, overtime pay and thirteenth-month pay against CBI. On 19
December 1984, the Labor Arbiter rendered judgment ordering CBI to reinstate
Marabe et. al. and to pay them back wages equivalent to 1 year or 300 working
days. On 27 November 1985, the NLRC dismissed the motion for reconsideration
filed by CBI on the ground that the said decision had already become final and
executory.
On 16 October 1986, the NLRC Research and Information Department made the
finding that Marabe, et. al.'s back wages amounted to P199,800.00. On 29
October 1986, the Labor Arbiter issued a writ of execution directing the sheriff to
execute the Decision, dated 19 December 1984. The writ was partially satisfied
through garnishment of sums from CBI's debtor, the Metropolitan Waterworks and
Sewerage Authority, in the amount of P81,385.34. Said amount was turned over
to the cashier of the NLRC. On 1 February 1989, an Alias Writ of Execution was
issued by the Labor Arbiter directing the sheriff to collect from CBI the sum of
P117,414.76, representing the balance of the judgment award, and to reinstate
Marabe, et. al. to their former positions. On 13 July 1989, the sheriff issued a
report stating that he tried to serve the alias writ of execution on petitioner
through the security guard on duty but the service was refused on the ground that
CBI no longer occupied the premises. On 26 September 1986, upon motion of
Marabe, et. al., the Labor Arbiter issued a second alias writ of execution. The said
writ had not been enforced by the special sheriff because, as stated in his
progress report dated 2 November 1989, that all the employees inside CBI's
premises claimed that they were employees of Hydro Pipes Philippines, Inc. (HPPI)
and not by CBI; that levy was made upon personal properties he found in the
premises; and that security guards with high-powered guns prevented him from
removing the properties he had levied upon. The said special sheriff
recommended that a "break-open order" be issued to enable him to enter CBI's
premises so that he could proceed with the public auction sale of the aforesaid
personal properties on 7 November 1989. On 6 November 1989, a certain Dennis
Cuyegkeng filed a third-party claim with the Labor Arbiter alleging that the
properties sought to be levied upon by the sheriff were owned by HPPI, of which
he is the Vice-President. On 23 November 1989, Marabe, et. al. filed a "Motion for
Issuance of a Break-Open Order," alleging that HPPI and CBI were owned by the
same incorporator/stockholders. They also alleged that petitioner temporarily
suspended its business operations in order to evade its legal obligations to them
and that Marabe, et. al. were willing to post an indemnity bond to answer for any
damages which CBI and HPPI may suffer because of the issuance of the breakopen order. On 2 March 1990, the Labor Arbiter issued an Order which denied
Marabe, et. al.'s motion for break-open order.
Marabe, et. al. then appealed to the NLRC. On 23 April 1992, the NLRC set aside
the order of the Labor Arbiter, issued a break-open order and directed Marabe, et.
al. to file a bond. Thereafter, it directed the sheriff to proceed with the auction
sale of the properties already levied upon. It dismissed the third-party claim for
lack of merit. CBI moved for reconsideration but the motion was denied by the
NLRC in a Resolution, dated 3 December 1992. Hence, the petition.
ISSUE:

Whether the NLRC was correct in issuing the break-open order to levy the HPPI
properties located at CBI amd/or HPPIs premises at 355 Maysan Road,
Valenzuela, Metro Manila.
HELD:
It is a fundamental principle of corporation law that a corporation is an entity
separate and distinct from its stockholders and from other corporations to which it
may be connected. But, this separate and distinct personality of a corporation is
merely a fiction created by law for convenience and to promote justice. So, when
the notion of separate juridical personality is used to defeat public convenience,
justify wrong, protect fraud or defend crime, or is used as a device to defeat the
labor laws, this separate personality of the corporation may be disregarded or the
veil of corporate fiction pierced. This is true likewise when the corporation is
merely an adjunct, a business conduit or an alter ego of another corporation. The
conditions under which the juridical entity may be disregarded vary according to
the peculiar facts and circumstances of each case. No hard and fast rule can be
accurately laid down, but certainly, there are some probative factors of identity
that will justify the application of the doctrine of piercing the corporate veil, to wit:
(1) Stock ownership by one or common ownership of both corporations; (2)
Identity of directors and officers; (3) The manner of keeping corporate books and
records; and (4) Methods of conducting the business. The SEC en banc explained
the "instrumentality rule" which the courts have applied in disregarding the
separate juridical personality of corporations as "Where one corporation is so
organized and controlled and its affairs are conducted so that it is, in fact, a mere
instrumentality or adjunct of the other, the fiction of the corporate entity of the
"instrumentality" may be disregarded. The control necessary to invoke the rule is
not majority or even complete stock control but such domination of instances,
policies and practices that the controlled corporation has, so to speak, no
separate mind, will or existence of its own, and is but a conduit for its principal. It
must be kept in mind that the control must be shown to have been exercised at
the time the acts complained of took place. Moreover, the control and breach of
duty must proximately cause the injury or unjust loss for which the complaint is
made." The test in determining the applicability of the doctrine of piercing the veil
of corporate fiction is as (1) Control, not mere majority or complete stock control,
but complete domination, not only of finances but of policy and business practice
in respect to the transaction attacked so that the corporate entity as to this
transaction had at the time no separate mind, will or existence of its own; (2)
Such control must have been used by the defendant to commit fraud or wrong, to
perpetuate the violation of a statutory or other positive legal duty or dishonest
and unjust act in contravention of plaintiff's legal rights; and (3) The aforesaid
control and breach of duty must proximately cause the injury or unjust loss
complained of. The absence of any one of these elements prevents "piercing the
corporate veil." In applying the "instrumentality" or "alter ego" doctrine, the
courts are concerned with reality and not form, with how the corporation operated
and the individual defendant's relationship to that operation. Thus the question of
whether a corporation is a mere alter ego, a mere sheet or paper corporation, a
sham or a subterfuge is purely one of fact. Here, while CBI claimed that it ceased
its business operations on 29 April 1986, it filed an Information Sheet with the
Securities and Exchange Commission on 15 May 1987, stating that its office
address is at 355 Maysan Road, Valenzuela, Metro Manila. On the other hand,
HPPI, the third-party claimant, submitted on the same day, a similar information
sheet stating that its office address is at 355 Maysan Road, Valenzuela, Metro
Manila. Further, both information sheets were filed by the same Virgilio O. Casio
as the corporate secretary of both corporations. Both corporations had the same
president, the same board of directors, the same corporate officers, and
substantially the same subscribers. From the foregoing, it appears that, among
other things, the CBI and the HPPI shared the same address and/or premises.

Under these circumstances, it cannot be said that the property levied upon by the
sheriff were not of CBI's. Clearly, CBI ceased its business operations in order to
evade the payment to Marabe, et. al. of back wages and to bar their
reinstatement to their former positions. HPPI is obviously a business conduit of CBI
and its emergence was skillfully orchestrated to avoid the financial liability that
already attached to CBI.
TESCO VS WCC
FACTS:
Petitioner is a domestic corporation engaged in the business of manufacturing
telephone equipment with offices at Sheridan Street, Mandaluyong, Rizal. Its
Executive Vice-President and General Manager is Jose Luis Santiago. It has a sister
company, the Utilities Management Corporation (UMACOR), with offices in the
same location. UMACOR is also under the management of Jose Luis Santiago.
On September 8, 1964, UMACOR employed the late Pacifica L. Gatus as
Purchasing Agent. On May 16, 1965, Pacifico L. Gatus was detailed with petitioner
company. He reported back to UMACOR on August 1, 1965. On January 13, 1967,
he contracted illness and although he retained to work on May 10, 1967, he died
nevertheless on July 14, 1967 of "liver cirrhosis with malignant degeneration."
On August 7, 1967, his widow, respondent Leonila S. Gatus, filed a "Notice and
Claim for Compensation" with Regional Office No. 4, Quezon City Sub-Regional
Office, Workmen's Compensation Section, alleging therein that her deceased
husband was an employee of TESCO, and that he died of liver cirrhosis. 1 On
August 9, 1967, and Office wrote petitioner transmitting the Notice and for
Compensation, and requiring it to submit an Employer's Report of Accident or
Sickness pursuant to Section 37 of the Workmen's Compensation Act (Act No.
3428). 2 An "Employer's Report of Accident or Sickness" was thus submitted with
UMACOR indicated as the employer of the deceased. The Report was signed by
Jose Luis Santiago. In answer to questions Nos. 8 and 17, the employer stated that
it would not controvert the claim for compensation, and admitted that the
deceased employee contracted illness "in regular occupation." 3 On the basis of
this Report, the Acting Referee awarded death benefits in the amount of
P5,759.52 plus burial expenses of P200.00 in favor of the heirs of Gatus in a letteraward dated October 6, 1967 4 against TESCO.
Replying on October 27, 1967, TESCO, through Jose Luis Santiago, informed the
Acting Referee that it would avail of the 15-days-notice given to it to state its nonconformity to the award and contended that the cause of the illness contracted by
Gatus was in no way aggravated by the nature of his work. 5
On November 6, 1967, TESCO requested for an extension of ten days within which
to file a Motion for Reconsideration, 6 and on November 15, 1967, asked for an
additional extension of five days. 7 TESCO filed its "Motion for Reconsideration
and/or Petition to Set Aside Award" on November 18, 1967, alleging as grounds
therefor, that the admission made in the "Employer's Report of Accident or
Sickness" was due to honest mistake and/or excusable negligence on its part, and
that the illness for which compensation is sought is not an occupational disease,
hence, not compensable under the law. 8 The extension requested was denied.
The Motion for Reconsideration was likewise denied in an Order issued by the
Chief of Section of the Regional Office dated December 28, 1967 9 predicated on
two grounds: that the alleged mistake or negligence was not excusable, and that
the basis of the award was not the theory of direct causation alone but also on
that of aggravation. On January 28, 1968, an Order of execution was issued by the
same Office.

On February 3, 1968, petitioner filed an "Urgent Motion to Compel Referee to

Elevate the Records to the Workmen's Compensation Commission for Review." 10
Meanwhile, the Provincial Sheriff of Rizal levied on and attached the properties of
TESCO on February 17, 1968, and scheduled the sale of the same at public
auction on February 26, 1968. On February 28, 1968, the Commission issued an
Order requiring petitioner to submit verified or true copies of the Motion for
Reconsideration and/or Petition to Set Aside Award and Order of December 28,
1967, and to show proof that said Motion for Reconsideration was filed within the
reglementary period, with the warning that failure to comply would result in the
dismissal of the Motion. However, before this Order could be released, TESCO filed
with this Court, on February 22, 1968, The present petition for "Certiorari with
Preliminary Injunction" seeking to annul the award and to enjoin the Sheriff from
levying and selling its properties at public auction.
On February 29, 1968, this Court required respondents to answer the Petition but
denied Injunction. 11 TESCO'S Urgent Motion dated April 2, 1968, for the issuance
of a temporary restraining order to enjoin the Sheriff from proceeding with the
auction sale of its properties was denied in our Resolution dated May 8, 1968.
ISSUE:
HELD:
To start with, a few basic principles should be re-stated the existence of employeremployee relationship is the jurisdictional foundation for recovery of
compensation under the Workmen's Compensation Law. 14 The lack of employeremployee relationship, however, is a matter of defense that the employer should
properly raise in the proceedings below. The determination of this relationship
involves a finding of fact, which is conclusive and binding and not subject to
review by this Court. 15
Viewed in the light of these criteria, we note that it is only in this Petition before
us that petitioner denied, for the first time, the employer-employee relationship.
In fact, in its letter dated October 27, 1967 to the Acting Referee, in its request for
extension of time to file Motion for Reconsideration, in its "Motion for
Reconsideration and/or Petition to Set Aside Award," and in its "Urgent Motion to
Compel the Referee to Elevate Records to the Commission for Review," petitioner
represented and defended itself as the employer of the deceased. Nowhere in
said documents did it allege that it was not the employer. Petitioner even
admitted that TESCO and UMACOR are sister companies operating under one
single management and housed in the same building. Although respect for the
corporate personality as such, is the general rule, there are exceptions. In
appropriate cases, the veil of corporate fiction may be pierced as when the same
is made as a shield to confuse the legitimate issues. 16
While, indeed, jurisdiction cannot be conferred by acts or omission of the parties,
TESCO'S denial at this stage that it is the employer of the deceased is obviously
an afterthought, a devise to defeat the law and evade its obligations. 17 This
denial also constitutes a change of theory on appeal which is not allowed in this
jurisdiction. 18 Moreover, issues not raised before the Workmen's Compensation
Commission cannot be raised for the first time on appeal. 19 For that matter, a
factual question may not be raised for the first time on appeal to the Supreme
Court. 20
This certiorari proceeding must also be held to have been prematurely brought.
Before a petition for certiorari can be instituted, all remedies available in the trial
Court must be exhausted first. 21 certiorari cannot be resorted to when the
remedy of appeal is present. 22 What is sought to be annulled is the award made
by the Referee. However, TESCO did not pursue the remedies available to it under

Rules 23, 24 and 25 of the Rules of the Workmen's Compensation Commission,

namely, an appeal from the award of the Referee, within fifteen days from notice,
to the Commission; a petition for reconsideration of the latter's resolution, if
adverse, to the Commission en banc; and within ten days from receipt of an
unfavorable decision by the latter, an appeal to this Court. As petitioner had not
utilized these remedies available to it, certiorari win not he, it being prematurely
filed. As this Court ruled in the case of Manila Jockey Club, Inc. vs. Del Rosario, 2
SCRA 462 (1961). 1wph1.t
An aggrieved party by the decision of a Commissioner should seek a
reconsideration of the decision by the Commission en banc. If the decision is
adverse to him, he may appeal to the Supreme Court. An appeal brought to the
Supreme Court without first resorting to the remedy referred to is premature and
may be dismissed.
Although this rule admits of exceptions, as where public welfare and the
advancement of public policy so dictate, the broader interests of justice so
require, or where the Orders complained of were found to be completely null and
void or that the appeal was not considered the appropriate remedy,
AD SANTOS VS VASQUEZ
FACTS:
Respondent Ventura Vasquez was petitioner's taxi driver. Sometime on December
22 or 23, 1961, at about 11:00 a.m., while driving petitioner's taxicab, he
vomitted blood. Aside from his hemoptysis, he suffered back pains, fever and
headache. He reported to petitioner the fact of his having vomitted blood. He was
sent to petitioner company's physician, Dr. Roman, who treated him and sent him
to Sto. Tomas Hospital where he was confined for six days. Thereafter, he was
admitted at the Quezon Institute. There he stayed until March 19, 1962 under the
medical care of Dr. Mario Lirag. Dr. Lirag diagnosed his ailment as pulmonary
tuberculosis, moderately advanced in both lungs. Upon his discharge on March 19,
1962, he was clinically improved. His X-ray examination, however, showed the
same finding, i.e., PTB, moderately advanced. He has not resumed work.
Offshoot of the foregoing is respondent's claim filed on May 9, 1962 with
the Workmen's Compensation Commission. 1 In affirming the decision of the
Hearing Officer, the Commission ordered petitioner:
ISSUE:
HELD:
1. Sickness manifested itself on December 22 or 23, 1961. Claim was filed on
May 9, 1962. Petitioner argues that by Section 24 of the Workmen's Compensation
Act, the claim should be thrown out of court. Because, according to petitioner,
such claim was not filed within two months following illness.
Petitioner's case must fail. Stabilized jurisprudence is that failure of the employer
to file with the Commission notice of controversion set forth in the second
paragraph of Section 45 of the Workmen's Compensation Act is a waiver of the
defense that the claim for compensation was not filed within the statutory period
and a forfeiture of the employer's right to controvert the claim. Petitioner here
knew of respondent's illness. Yet, it did not controvert respondent's right to
compensation. Constructively, such failure is an admission that the claim is
compensable. 2

2. Petitioner's averment that respondent driver had no cause of action against

petitioner is equally without merit. Respondent's claim for compensation herein is
directed against petitioner A.D. Santos, Inc. Petitioner, in answer to the claim,
categorically admitted that claimant was its taxi driver. Add to this is the fact that
the claimant contracted pulmonary tuberculosis by reason of his said
employment. And respondent's cause of action against petitioner is complete.
But petitioner, cites the fact that respondent driver, in the course of his
testimony, mentioned that he worked for the City Cab operated by Amador
Santos. This will not detract from the validity of respondent's right to
compensation. For, the truth is that really at one time Amador Santos was the sole
owner and operator of the City Cab. It was subsequently transferred to petitioner
A.D. Santos, Inc. in which Amador Santos was an officer. The mention by
respondent of Amador Santos as his employer in the course of his testimony, in
the words of this Court in Sugay vs. Reyes, L-20451, December 28, 1964, "should
not be allowed to confuse the facts relating to employer-employee relationship"
for "when the veil of corporate fiction is made as a shield to perpetrate a fraud
and/or confuse legitimate issues (here, the relation of employer-employee), the
same should be pierced."
MCCONNEL VS CA
FACTS:
the Park Rite Co., Inc., a Philippine corporation, was originally organized on or
about April 15, 1947, with a capital stock of 1,500 shares at P1.00 a share. The
corporation leased from Rafael Perez Rosales y Samanillo a vacant lot on Juan
Luna street (Manila) which it used for parking motor vehicles for a consideration.
It turned out that in operating its parking business, the corporation occupied and
used not only the Samanillo lot it had leased but also an adjacent lot belonging to
the respondents-appellees Padilla, without the owners' knowledge and consent.
When the latter discovered the truth around October of 1947, they demanded
payment for the use and occupation of the lot.
The corporation (then controlled by petitioners Cirilo Parades and Ursula Tolentino,
who had purchased and held 1,496 of its 1,500 shares) disclaimed liability,
blaming the original incorporators, McConnel, Rodriguez and Cochrane.
Whereupon, the lot owners filed against it a complaint for forcible entry in the
Municipal Court of Manila on 7 October 1947 (Civil Case No. 4031).
Judgment was rendered in due course on 13 November 1947, ordering the Park
Rite Co., Inc. to pay P7,410.00 plus legal interest as damages from April 15, 1947
until return of the lot. Restitution not having been made until 31 January 1948, the
entire judgment amounted to P11,732.50. Upon execution, the corporation was
found without any assets other than P550.00 deposited in Court. After their
application to the judgment credit, there remained a balance of P11,182.50
outstanding and unsatisfied.
The judgment creditors then filed suit in the Court of First Instance of Manila
against the corporation and its past and present stockholders, to recover from
them, jointly and severally, the unsatisfied balance of the judgment, plus legal
interest and costs. The Court of First Instance denied recovery; but on appeal, the
Court of Appeals (CA-G.R. No. 8434-R) reversed, finding that the corporation was a
mere alter ego or business conduit of the principal stockholders that controlled it
for their own benefit, and adjudged them responsible for the amounts demanded
by the lot owners
ISSUE:

whether the individual stockholders maybe held liable for obligations contracted
by the corporation
HELD:
The Court of Appeals has made express findings to the following effect:
There is no question that a wrong has been committed by the so-called Park Rite
Co., Inc., upon the plaintiffs when it occupied the lot of the latter without its prior
knowledge and consent and without paying the reasonable rentals for the
occupation of said lot. There is also no doubt in our mind that the corporation was
a mere alter ego or business conduit of the defendants Cirilo Paredes and Ursula
Tolentino, and before them the defendants M. McConnel, W. P. Cochrane, and
Ricardo Rodriguez. The evidence clearly shows that these persons completely
dominated and controlled the corporation and that the functions of the
corporation were solely for their benefits.
When it was originally organized on or about April 15, 1947, the original
incorporators were M. McConnel, W. P. Cochrane, Ricardo Rodriguez, Benedicto M.
Dario and Aurea Ordrecio with a capital stock of P1,500.00 divided into 1,500
shares at P1.00 a share. McConnel and Cochrane each owned 500 shares, Ricardo
Rodriguez 408 shares, and Dario and Ordrecio 1 share each. It is obvious that the
shares of the last two named persons were merely qualifying shares. Then or
about August 22, 1947 the defendants Cirilo Paredes and Ursula Tolentino
purchased 1,496 shares of the said corporation and the remaining four shares
were acquired by Bienvenido J. Claudio, Quintin C. Paredes, Segundo Tarictican,
and Paulino Marquez at one share each. It is obvious that the last four shares
bought by these four persons were merely qualifying shares and that to all intents
and purposes the spouses Cirilo Paredes and Ursula Tolentino composed the socalled Park Rite Co., Inc. That the corporation was a mere extension of their
personality is shown by the fact that the office of Cirilo Paredes and that of Park
Rite Co., Inc. were located in the same building, in the same floor and in the same
room at 507 Wilson Building. This is further shown by the fact that the funds of
the corporation were kept by Cirilo Paredes in his own name (p. 14, November 8,
1950, T.S.N.) The corporation itself had no visible assets, as correctly found by the
trial court, except perhaps the toll house, the wire fence around the lot and the
signs thereon. It was for this reason that the judgment against it could not be fully
satisfied. (Emphasis supplied).
The facts thus found can not be varied by us, and conclusively show that the
corporation is a mere instrumentality of the individual stockholder's, hence the
latter must individually answer for the corporate obligations. While the mere
ownership of all or nearly all of the capital stock of a corporation is a mere
business conduit of the stockholder, that conclusion is amply justified where it is
shown, as in the case before us, that the operations of the corporation were so
merged with those of the stockholders as to be practically indistinguishable from
them. To hold the latter liable for the corporation's obligations is not to ignore the
corporation's separate entity, but merely to apply the established principle that
such entity can not be invoked or used for purposes that could not have been
intended by the law that created that separate personality.
EMILLIO CANO ENTERPRISE VS CIR
FACTS:
Honorata Cruz was terminated by Emilio Cano Enterprises, Inc. (ECEI). She then
filed a complaint for unfair labor practice against Emilio Cano, in his capacity as
president and proprietor, and Rodolfo Cano, in his capacity as manager. Cruz won

and the Court of Industrial Relations (CIR) ordered the Canos to reinstate Cruz plus
pay her backwages with interest. The Canos appealed to the CIR en banc but
while on appeal Emilio died. The Canos lost on appeal and an order of execution
was levied against ECEIs property. ECEI filed an ex parte motion to quash the writ
as ECEI avers that it is a corporation with a separate and distinct personality from
the Canos. Their motion was denied and ECEI filed a petition for certiorari with the
Supreme Court.
ISSUE:
Whether or not the judgment of the Court of Industrial Relations is correct.
HELD:
Yes. This is an instance where the corporation and its members can be considered
as one. ECEI is a close family corporation the incorporators are members of the
Cano family. Further, the Canos were sued in their capacity as officers of ECEI not
in their private capacity. Having been sued officially their connection with the case
must be deemed to be impressed with the representation of the corporation. The
judgment against the Canos has a direct bearing to ECEI. Verily, the order against
them is in effect against the corporation. Further still, even if this technicality be
strictly observed, what will simply happen is for this case to be remanded, change
the name of the party, but the judgment will still be the same there can be no
real benefit and will only subversive to the ends of justice. In this case, to hold
ECEI liable is not to ignore the legal fiction but merely to give meaning to the
principle that such fiction cannot be invoked if its purpose is to use it as a shield
to further an end subversive of justice.
NAMARCO VS ASSOCIATED FINANCE
FACTS:
In 1958, National Marketing Corporation (NAMARCO) entered into an agreement
with Associated Finance Company, Inc. (AFCI). NAMARCO was represented by its
general manager Benjamin Estrella. AFCI was represented by its president
Francisco Sycip. The agreement was that NAMARCO will deliver raw sugar to AFCI.
In exchange, AFCI will deliver refined sugar to NAMARCO. NAMARCO delivered the
raw sugar but AFCI failed to comply with its obligation. NAMARCO then demanded
AFCI to comply or if not pay the amount of the raw sugar delivered which was at
P403,514.28. AFCI was not able to do either hence NAMARCO sued AFCI and Sycip
was impleaded.
ISSUE:
Whether or not Sycip should be held jointly and severally liable with Associated
Finance Company, Inc.
HELD:
Yes. In this case, it is proper to pierce the veil of corporate fiction. It was proven
that during the time of the agreement, AFCI was already insolvent. Such fact was
already known to Sycip. He knew that AFCI was not in a position to transact with
NAMARCO because it could not possibly comply with its obligations. Sycips
assurances that AFCI can deliver said refined sugar products is obviously
fashioned to defraud NAMARCO into delivering the raw sugar to AFCI.
Consequently, Sycip cannot now seek refuge behind the general principle that a
corporation has a personality distinct and separate from that of its stockholders
and that the latter are not personally liable for the corporate obligations. He is

therefore liable jointly and severally with AFCI to pay the amount claim for the raw
sugar delivered plus other damages claimed by NAMARCO with interest.
JACINTO VS CA
FACTS:
This is an appeal by certiorari to partially set aside the Decision of the Court of
Appeals in C.A-G.R. CV No. 081531.promulgated on 19 August 1987, which
affirmed in toto the decision of the Regional Trial Court of Manila, Branch 11, in
Civil Case No. 133164 entitled "Metropolitan Bank and Trust Co. vs. Inland
Industries Inc. and Roberto Jacinto," the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering defendants to pay, jointly and
severally, the plaintiff, the principal obligation of P382,015.80 (Annex J-1 to J-3 of
Stipulation), with interest/charges thereon at the rate of 16 % per annum from
January 1, 1979 up to the time the said amount is fully paid, plus the sum of
P20,000.00 as attorney's fees. Said defendants are further ordered to pay in
solidum the costs of this suit.
SO ORDERED.2
Petitioner's co-defendant in the courts below, Inland Industries Inc., just as in the
case of petitioner's motion to reconsider the questioned decision,3 chose not to
join him in this appeal.
In Our resolution of 28 August 1988 We required the respondent to comment on
the petition. Respondent Metropolitan Bank and Trust Co. filed its comment4 on
12 October 1988. We required the petitioner to file a reply thereto,5 which he
comment plied with on 20 December 1988.6
We gave due course to the petition on 8 May 19897 and required the parties to
submit their respective memoranda.
Private respondent filed its memorandum on 29 June 19898 while petitioner asked
leave to adopt his petition and reply as his memorandum,9 which We granted on
14 June 1989.10
ISSUE:
HELD:
In its resolution of 29 September 1987, the respondent Court of Appeals, on the
contention again of petitioner that the finding that defendant corporation is his
mere alter ego is not supported by the evidence and has no legal justification,
ruled that:
The contention . . . is nothing but an empty assertion. A cursory perusal of the
decision would at once readily show on pages 11-13 of the same that said factual
findings of the court is well grounded as the same in fact even include a portion of
the very testimony of said defendant-appellant admitting that he and his wife own
52% of the stocks of defendant corporation. The stipulation of facts also show
(sic) that appellant Roberto Jacinto acted in his capacity as President/General
Manager of defendant corporation and that "all the goods covered by the three (3)
Letters of Credit (Annexes "A", "B" & "C") and paid for under the Bills of Exchange
(Annexes "D", "E" & "F") were delivered to and received by defendant Inland
Industries, Inc. through its co-defendant Roberto A. Jacinto, its President and
General Manager, who signed for and in behalf of defendant Inland and agreed to
the terms and conditions of three (3) separate trust receipts covering the same.

Petitioner, however, faults the courts below for piercing the veil of corporate
fiction despite the absence of any allegation in the complaint questioning the
separate identity and existence of Inland Industries, Inc. This is not
accurate.1wphi1 While on the face of the complaint there is no specific
allegation that the corporation is a mere alter ego of petitioner, subsequent
developments, from the stipulation of facts up to the presentation of evidence and
the examination of witnesses, unequivocally show that respondent Metropolitan
Bank and Trust Company sought to prove that petitioner and the corporation are
one or that he is the corporation. No serious objection was heard from petitioner.
Section 5 of Rule 10 of the Rules of Court provides:
Sec. 5. Amendment to conform to or authorize presentation of evidence. When
issues not raised by the pleadings are tried by express or implied consent of the
parties, they shall be treated in all respects, as if they had been raised in the
pleadings. Such amendment of the pleadings as may be necessary to cause them
to conform to the evidence and to raise these issues may be made upon motion of
any party at any time, even after judgment; but failure so to amend does not
affect the trial of these issues. If the evidence is objected to at the time of trial on
the ground that it is not within the issues made by the pleadings, the court may
allow the pleadings to be amended and shall do so freely when the presentation
of the merits of the action will be subserved thereby and the objecting party fails
to satisfy the court that the admission of such evidence would prejudice him in
maintaining his action or defense upon the merits. The court may grant
continuance to enable the objecting party to meet such evidence.
Pursuant thereto, "when evidence is presented by one party, with the express or
implied consent of the adverse party, as to issues not alleged in the pleadings,
judgment may be rendered validly as regards those issues, which shall be
considered as if they have been raised in the pleadings. There is implied consent
to the evidence thus presented when the adverse party fails to object thereto.12
ARCILLA VS CA
FACTS:
On 4 June 1985, private respondent filed with the Regional Trial Court (RTC) of
Catanduanes a complaint for a sum of money against petitioner.
In his Answer, 3 petitioner does not deny having had business transactions with
the private respondent but alleges that the professional relationship began only in
August of 1982 when he "was looking for a "pro-forma" invoice to support his loan
with the Kilusang Kabuhayan at Kaunlaran (KKK for short) under the Ministry of
Human Settlement (sic)." 4 He explicitly admits that "(H)is loan was in the same
of his family corporation, CSAR Marine Resources,
Inc.;" 5 however, the "vales", more specifically Annexes "A" to "DD" of the
complaint, "were liquidated in the bank loan releases." 6 It is thus clear that his
main defense is payment; he did not interpose any other affirmative defense.
In his Pre-Trial Brief, 7 petitioner reiterated the earlier claim that his first business
dealing with the plaintiff (private respondent herein) was in August of 1982. This
time, however, he alleges that "as President of CSAR Marine Resources, Inc., he
requested for a pro-forma Invoice for said corporation to support the loan
application with the Kilusang Kabuhayan at Kaunlaran (KKK for short), with the
Ministry of Human Settlement (sic).
ISSUE:
HELD:

The grant of affirmative relief based on the first assigned error would really
redound to the benefit of an entirety which was not made a party in the main case
and which did not seek to intervene therein. Therefore, it has no personality to
seek as review of the public respondent's Amended Decision under Rule 45 of the
Rules of Court. Only the original parties to the main case may do so. 26 Moreover,
by no stretch of even the most fertile imagination may one be able to conclude
that the challenged Amended Decision directed Csar Marine Resources, Inc. to pay
the amounts adjudge. By its clear and unequivocal language, it is the petitioner
who was declared liable therefor and consequently made to pay. That the latter
was ordered to do so as president of the corporation would not free him from the
responsibility of paying the due amount simply because according to him, he had
ceased to be corporate president; such conclusion stems from the fact that the
public respondent, in resolving his motion for clarificatory judgment, pierced the
veil of corporate fictional and cast aside the contention that both he and the
corporation have separate and distinct personalities. In short, even if We are to
assume arguendo that the obligation was incurred in the name of the corporation,
the petitioner would still be personally liable therefor because for all legal intents
and purposes, he and the corporation are one and the same. Csar Marine
Resources, Inc. is nothing more than his business conduit and alter ego. The
fiction of a separate juridical personality conferred upon such corporation by law
should be disregarded. 27 Significantly, petitioner does not seriously challenge
the public respondent's application of the doctrine which permits the piercing of
the corporate veil and the disregarding of the fiction of a separate juridical
personality; this is because he knows only too well that from the very beginning,
he merely used the corporation for his personal purposes.
In his answer to the complaint, petitioner volunteered the information that the
pro-forma invoice which he obtained from the private respondent and which
became the source of the obligations reflected in the "vales" was to support his
loan.
Moreover, petitioner neglected to set up in his Answer the defense that he is not
personally liable to private respondent because the "vales" were corporate
obligations of Csar Marine Resources, Inc.. Of course, that defense would have
been inconsistent with his volunteered admission that the KKK loan which
resulted in the procurement of the pro-forma invoice from the private respondent
was for his benefit. In any case, the failure to set it up as an affirmative defense
amounted to a waiver thereof. Section 2, Rule 9 of the Rules of Court expressly
proved that defenses and objections, other than the failure to state a cause of
action and lack of jurisdiction, not pleaded either in a motion to dismiss or in the
answer are deemed waved. Petitioner, as a lawyer, knows or is supposed to know
this rule. Since he prepared the Answer himself, We cannot think of any possible
reason why he failed to set up this defense other than his realization of its
inherent weakness or his outright inexcusable negligence of forgetfulness. And
even if it were due to inadvertence, he could still have subsequently availed of
Section 2, Rule 10 of the Rules of Court which allows a party to amend his answer
as a matter of right within the period therein stated. Failing that, he could have
resorted to Section 3 thereof which allows the making of amendments upon leave
of court. On the other hand, if the lapse was due to forgetfulness, it is just
unfortunate that he did not exercise due diligence in the conduct of his won
affairs. He can expect no reward for it.
Then too, as correctly noted by the public respondent, petitioner, in his Brief, did
not assign as error the holding of the trial court that he is solely liable for the
obligation.
Petitioner's volunteered admission that he procured the pro-forma invoice from
the private respondent in connection with his loan from the KKK, using his family

corporation in the process, and his deliberate waiver of the aforementioned

defense provide an insurmountable obstacle to the viability of this petition.
WHEREFORE, for utter lack of merit, the instant petition is DENIED with costs
against petitioner.
AC RANSOM LABOR UNION VS NLRC
FACTS:
The records show that, upon application filed by RANSOM on April 2, 1973, it was
granted clearance by the Secretary of Labor on June 7, 1973 to cease operation
and terminate employment effective May 1, 1973, without prejudice to the right of
subject employees to seek redress of grievances under existing laws and decrees.
3 The reasons given by RANSOM for the clearance application were financial
difficulties on account of obligations incurred prior to 1966.
On January 21, 1974, the UNION filed another Motion for Execution alleging that
although RANSOM had assumed a posture of suffering from business reverse, its
officers and principal stockholders had organized a new corporation, the Rosario
Industrial Corporation (thereinafter called ROSARIO), using the same equipment,
personnel, business stocks and the same place of business. For its part, RANSOM
declared that ROSARIO is a distinct and separate corporation, which was
organized long before these instant cases were decided adversely against
RANSOM.
It appears that sometime in 1969, ROSARIO, a closed corporation, was, in fact,
established. It was engaged in the same line of business as RANSOM with the
same Hernandez family as the owners, the same officers, the same President, the
same counsel and the same address at 555 Quirino Avenue, Paranaque, Rizal. The
compound, building, plant, equipment, machinery, laboratory and bodega were
the same as those occupied and used by RANSOM. The UNION claims that
ROSARIO thrives to this day.
Writs of execution were issued successively against RANSOM on June 23, 1976,
and February 17, 1977, to no avail.
On December 18, 1978, the UNION again filed an ex-parte Motion for Writ of
Execution and Garnishment praying that the Writ issue against the Officers/Agents
of RANSOM personally and or their estates, as the case may be, considering their
success in hiding or shielding the assets of said company. RANSOM countered that
the CIR Decision, dated August 19, 1972, could no longer be enforced by mere
Motion because more than five (5) years had already lapsed.
ISSUE:
HELD:
Incontrovertible is the fact that RANSOM was found guilty by the CIR, in its
Decision of August 19, 1972, of unfair labor practice; that its officers and agents
were ordered to cease and desist from further committing acts constitutive of the
same, and to reinstate immediately the 22 union members to their respective
positions with backwages from July 25, 1969 until actually reinstated.
The CIR Decision became final, conclusive, and executory after this Court denied
the RANSOM petition for review in 1973. In other words, this Court upheld that
portion of the judgment ordering the officers and agents of RANSOM to reinstate
the laborers concerned, with backwages. The inclusion of the officers and agents
was but proper since a corporation, as an artificial being, can act only through

them. It was also pursuant to the CIR Act (CA No. 103 ), 7 the Industrial Peace Act
(R.A. 875) 8 the Minimum Wage Law (R.A. 602). 9 Consequently, when, in
resolving the UNION's Motion for Writ of Execution and Garnishment in the Order
of March 11, 1980, Labor Arbiter Genilo named the seven (17) private
respondents herein as the RANSOM officers and agents, who should be held liable
(supra), he merely implemented the already final and executory CIR decision of
August 19, 1972. The NLRC, on appeal to it by RANSOM, could not have modified
the CIR Decision, as affirmed by this Court, by relieving RANSOM's officers and
agents of liability. It is also for that reason that in our Decision of June 10, 1986 we
set aside said NLRC Decision and reinstated the Order of Labor Arbiter Genilo,
with modification, in that we limited liability for backwages due the 22 UNION
members to the President of RANSOM in 1974 jointly and severally with other
Presidents of the same corporation who had been elected as such after 1972 or
up to the time the corporation life was terminated, since the President should also
be deemed included in the term "employer. "
The foregoing, however, limits the scope of liability and deviates from the CIR
Decision, affirmed by this Court in 1973, holding the officers and agents of
RANSOM liable. In other words, the officers and agents listed in the Genilo Order
except for those who have since passed away, should, as affirmed by this Court,
be held jointly and severally liable for the payment of backwages to the 22
strikers.
This finding does not ignore the legal fiction that a corporation has a personality
separate and distinct from its stockholders and members, for, as this Court had
held "where the incorporators and directors belong to a single family, the
corporation and its members can be considered as one in order to avoid its being
used as an instrument to commit injustice," 10 or to further an end subversive of
justice. 11 In the case of Claparols vs. CIR 12 involving almost similar facts as in
this case, it was also held that the shield of corporate fiction should be pierced
when it is deliberately and maliciously designed to evade financial obligations to
employees. To the same effect was this Court's rulings in still other cases:
When the notion of legal entity is used as a means to perpetrate fraud or an
illegal act or as a vehicle for the evasion of an existing obligation, the
circumvention of statutes, and or confuse legitimate issues the veil which protects
the corporation will be lifted
LIM VS NLRC
FACTS:
The record shows that private respondent Victoria Calsado was hired by Sweet
Lines, Inc. on March 5, 1981, as Senior Branch Officer of its International Accounts
Department for a fixed salary and a stipulated 5 % commission on sales
production. On December 1, 1983, after tendering her resignation to accept
another offer of employment, she was persuaded to remain with an offer of her
promotion to Manager of the Department with corresponding increase in
compensation, which she accepted. She was also allowed to buy a second-hand
Colt Lancer pursuant to a liberal car plan under which one-half of the cost was to
be paid by the company and the other half was to be deducted from her salary.
Relations began to sour later, however, when she repeatedly asked for payment of
her commissions, which had accumulated and were long overdue. She also
complained of the inordinate demands on her time even when she was sick and in
the hospital. Finally, on July 16, 1985, she was served with a letter from Samuel
Casas Lim, the other petitioner, informing her that her "employment with Sweet
Lines" would terminate on August 5, 1985. Efforts were also taken by Sweet Lines
to forcibly take the car from her, culminating in an action for replevin against her
in the regional trial court of Manila.

On August 14, 1985, Calsado filed a complaint against both petitioners for illegal
dismissal, illegal deduction, and unpaid wages and commissions plus moral and
exemplary damages, among other claims. 1 There followed an extended hearing
where she testified on the details of her employment, emphasizing her
unsatisfactory treatment by the management of Sweet Lines and especially the
termination of her services without the required notice and hearing and without
valid cause. She also presented four other witnesses to corroborate her charges.
The respondents' defenses were based mainly on the claim that Calsado was not
an employee of Sweet Lines but an independent contractor and that therefore
their dispute with her came under the jurisdiction of the civil courts and not of the
Labor Arbiter. 2 On this matter the private respondent pointedly comments:
The decision was appealed to the National Labor Relations Commission and
affirmed in toto except as to the attorney's fees, which were reduced to 10% of
the total award. 5 Both Sweet Lines and Lim then came to us in separate petitions
to raise the above-stated issues. On October 14, 1987, we issued a temporary
restraining order against the enforcement of the decision of the public respondent
dated September 11, 1987. 6 The petitions were consolidated on December 7,
1987, and given due course on May 16, 1987, with the parties being required to
submit their respective memoranda. On the first question, we hold that the
employee-employer relations between Calsado and Sweet Lines have been
sufficiently established. The following documents submitted by the former and not
controverted by the latter should belie the claim that Calsado was only an
independent contractor over whom Sweet Lines had no control.
ISSUE:
HELD:
On the fourth issue, we agree with petitioner Lim that he cannot be held
personally liable with Sweet Lines for merely having signed the letter informing
Calsado of her separation. There is no evidence that he acted with malice or bad
faith. The letter, in fact, informed her not only of her separation but also of the
benefits due her as a result of the termination of her services.
It is true that Lim has raised this matter rather tardily and also that he belongs to
a closed corporation controlled by the members of one family only. But these
circumstances should not be allowed to operate against him if he is to be
accorded substantial justice in the resolution of the private respondent's claim. As
we said in Ortigas vs. Lufthansa German Airlines, 10 the Court is "clothed with
ample authority to review matters, even if they are not assigned as errors in the
appeal, if it finds that its consideration is necessary in arriving at a just decision of
the case." As for the second charge, the mere fact that Lim is part of the family
corporation does not mean that all its acts are imputable to him directly and
personally. His acts were official acts, done in his capacity as Vice President of
Sweet Lines and on its behalf. There is no showing that he acted without or in
excess of his authority or was motivated by personal ill-will toward Calsado. The
applicable decision is Sunio v. NLRC, 11 where it was held:
Petitioner Sunio was impleaded in the Complaint in his capacity as General
Manager of petitioner corporation. There appears to be no evidence on record that
he acted maliciously or in bad faith in terminating the services of private
respondents. His act, therefore, was within the scope of his authority and was a
corporate act.
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

entity to which it may be related. 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.
Petitioner Sunio, therefore, should not have been made personally answerable for
the payment of private respondents' back salaries.
The case of Ransom v. NLRC 12 is not in point because there the debtor
corporation actually ceased operations after the decision of the Court of Industrial
Relations was promulgated against it, making it necessary to enforce it against its
former president. Sweet lines is still existing and able to satisfy the judgment in
favor of the private respondent.
The Solicitor General, invoking equity rather than law, observes that making Lim
solidarity liable with Sweet Lines will ensure payment of Calsado's claim. But this
precaution, even assuming it to be valid, is really unnecessary. in fact, as a
condition for the issuance of our temporary restraining order of October 14, 1987,
Sweet Lines posted as required a bond in the amount of P850,000.00, which
should cover the amounts awarded to the private respondent.13
We especially uphold the award of moral and exemplary damages in view of the
acts of harassment and bad faith testified to by the private respondent and not
refuted by Sweet Lines. Her treatment during her employment, the delays in the
payment of her commissions, the pressures exerted upon her even when she was
sick in the hospital, the suggestion of one of the company officers that she discuss
her complaints with him alone in a private place, her arbitrary separation, the
questionable attempts to get the vehicle from her after her dismissal, among
other aggravations, clearly demonstrate the validity of the private respondent's
complaints.
DE GUZMAN VS NLRC
FACTS:
Arturo de Guzman was the general manager of the Manila office of the Affiliated
Machineries Agency, Ltd., which was based in Hongkong. On June 30, 1986, he
received a telex message from Leo A. Fialla, managing director of AMAL in its main
office, advising him of the closure of the company due to financial reverses. This
message triggered the series of events that are the subject of this litigation.
Immediately upon receipt of the advise, De Guzman notified all the personnel of
the Manila office. The employees then sent a letter to AMAL accepting its decision
to close, subject to the payment to them of their current salaries, severance pay,
and other statutory benefits. De Guzman joined them in these representations.
These requests were, however, not heeded. Consequently, the employees, now
herein private respondents, lodged a complaint with the NLRC against AMAL,
through Leo A. Fialla and Arturo de Guzman, for illegal dismissal, unpaid wages or
commissions, separation pay, sick and vacation leave benefits, 13th month pay,
and bonus.
For his part, the petitioner began selling some of AMAL's assets and applied the
proceeds thereof, as well as the remaining assets, to the payment of his claims
against the company. He also organized Susarco, Inc., with himself as its president
and his wife as one of the incorporators and a member of the board of directors.
This company is engaged in the same line of business and has the same clients as
that of the dissolved AMAL.

With this development, Susarco and its officers were impleaded in the amended
complaint of the private respondents. Later, William Quasha and/or Cirilo Asperilla
were also included in the suit as the resident agents of AMAL of the Philippines.
On November 7, 1986, the petitioner filed his own complaint with the NLRC
against AMAL for his remaining unsatisfied claims.
On May 29, 1987, Labor Arbiter Eduardo G. Magno, to whom the petitioner's
complaint was assigned, rendered a decision ordering AMAL to pay the petitioner
the amount of P371,469.59 as separation pay, unpaid salary and commissions,
after deducting the value of the assets earlier appropriated by the petitioner. 2
On September 30, 1987, Labor Arbiter Ma. Lourdes A. Sales, who tried the private
respondents' complaint, rendered a decision
1. Ordering Respondents AMAL and Arturo de Guzman to pay jointly and
severally to each Complainant
ISSUE:
HELD:
This decision was on appeal affirmed in toto by the NLRC, which is now faulted for
grave abuse of discretion in this petition for certiorari.
The petitioner does not dispute the jurisdiction of the Labor Arbiter and NLRC over
the complaint of the private respondents against AMAL in view of their previous
employment relationship. He argues, however, that the public respondents acted
without or in excess of jurisdiction in holding him jointly and severally liable with
AMAL as he was not an employer of the private respondents.
The Solicitor General and the private respondents disagree. They maintain that
the petitioner, being AMAL's highest local representative in the Philippines, may
be held personally answerable for the private respondents' claims because he is
included in the term "employer" under Art. 212 (c),
(now e) of the Labor Code which provides:
Art. 212.

Definitions.

xxx xxx xxx

c. "Employer" includes any person acting in the interest of an employer, directly
or indirectly. . . .
In the leading case of A.C. Ransom Labor Union-CCLU vs. NLRC, 4 as affirmed in
the subsequent cases of Gudez vs. NLRC, 5 and Maglutac vs.
NLRC, 6 this Court treated the president of the employer corporation as an
"employer" and held him solidarily liable with the said corporation for the
payment of the employees' money claims. So was the vice-president of the
employer corporation in the case of Chua vs. NLRC. 7
The aforecited cases will not apply to the instant case, however, because the
persons who were there made personally liable for the employees' claims were
stockholders-officers of the respondent corporation. In the case at bar, the
petitioner, while admittedly the highest ranking local representative of AMAL in
the Philippines, is nevertheless not a stockholder and much less a member of the
board of directors or an officer thereof. He is at most only a managerial employee
under Art. 212 (m) of the Labor Code, which reads in relevant part as follows:

Art 212. Definitions.

xxx xxx xxx
m. Managerial employee is one who is vested with powers and prerogatives to
lay down and execute management policies and/or to
hire, transfer, suspend, lay off, recall, discharge, assign or discipline employees. . .
.
As such, the petitioner cannot be held directly responsible for the decision to close
the business that resulted in his separation and that of the private respondents.
That decision came directly and exclusively from AMAL. The petitioner's
participation was limited to the enforcement of this decision in line with his duties
as general manager of the company. Even in a normal situation, in fact, he would
not be liable, as a managerial employee of AMAL, for the monetary claims of its
employees. There should be no question that the private respondents' recourse
for such claims cannot be against the petitioner but against AMAL and AMAL
alone.

GARCIA VS EXECUTIVE SECRETARY

FACTS:
On November 5, 1997, this Court in Tatad v. Secretary of the Department of
Energy and Lagman, et al., v. Hon. Ruben Torres, et al.,[1] declared Republic Act
No. 8180, entitled An Act Deregulating the Downstream Oil Industry and For Other
Purposes, unconstitutional, and its implementing Executive Order No. 392 void.
R.A. 8180 was struck down as invalid because three key provisions intended to
promote free competition were shown to achieve the opposite result. More
specifically, this Court ruled that its provisions on tariff differential, stocking of
inventories, and predatory pricing inhibit fair competition, encourage monopolistic
power, and interfere with the free interaction of the market forces.
While R.A. 8180 contained a separability clause, it was declared unconstitutional
in its entirety since the three (3) offending provisions so permeated the law that
they were so intimately the esse of the law. Thus, the whole statute had to be
invalidated.
As a result of the Tatad decision, Congress enacted Republic Act No. 8479, a new
deregulation law without the offending provisions of the earlier law. Petitioner
Enrique T. Garcia, a member of Congress, has now brought this petition seeking to
declare Section 19 thereof, which sets the time of full deregulation,
unconstitutional. After failing in his attempts to have Congress incorporate in the
law the economic theory he espouses, petitioner now asks us, in the name of
upholding the Constitution, to undo a violation which he claims Congress has
committed.
ISSUE:
HELD:
Our ruling in Tatad is categorical that the Constitutions Article XII, Section 19, is
anti-trust in history and spirit. It espouses competition. We have stated that only

competition which is fair can release the creative forces of the market. We ruled
that the principle which underlies the constitutional provision is competition. Thus:
Section 19, Article XII of our Constitution is anti-trust in history and in spirit. It
espouses competition. The desirability of competition is the reason for the
prohibition against restraint of trade, the reason for the interdiction of unfair
competition, and the reason for regulation of unmitigated monopolies.
Competition is thus the underlying principle of section 19, Article XII of our
Constitution which cannot be violated by R.A. No. 8180. We subscribe to the
observation of Prof. Gellhorn that the objective of anti-trust law is to assure a
competitive economy, based upon the belief that through competition producers
will strive to satisfy consumer wants at the lowest price with the sacrifice of the
fewest resources. Competition among producers allows consumers to bid for
goods and services, and thus matches their desires with societys opportunity
costs. He adds with appropriateness that there is a reliance upon the operation of
the market system (free enterprise) to decide what shall be produced, how
resources shall be allocated in the production process, and to whom the various
products will be distributed. The market system relies on the consumer to decide
what and how much shall be produced, and on competition, among producers to
determine who will manufacture it.[6]
In his recital of the antecedent circumstances, petitioner repeats in abbreviated
form the factual findings and conclusions which led the Court to declare R.A. 8180
unconstitutional. The foreign oligopoly or cartel formed by respondents Shell,
Caltex and Petron, their indulging in price-fixing and overpricing, their blockade
tactics which effectively obstructed the entry of genuine competitors, the dangers
posed by the oil cartel to national security and economic development, and other
prevailing sentiments are stated as axiomatic truths. They are repeated in
capsulized context as the current background facts of the present petition.
The empirical existence of this deplorable situation was precisely the reason why
Congress enacted the oil deregulation law. The evils arising from conspiratorial
acts of monopoly are recognized as clear and present. But the enumeration of the
evils by our Tatad decision was not for the purpose of justifying continued
government control, especially price control. The objective was, rather, the
opposite. The evils were emphasized to show the need for free competition in a
deregulated industry. And to be sure, the measures to address these evils are for
Congress to determine, but they have to meet the test of constitutional validity.
The Court respects the legislative finding that deregulation is the policy answer to
the problems. It bears stressing that R.A. 8180 was declared invalid not because
deregulation is unconstitutional. The law was struck down because, as crafted,
three key provisions plainly encouraged the continued existence if not the
proliferation of the constitutionally proscribed evils of monopoly and restraint of
trade.
In sharp contrast, the present petition lacks a factual foundation specifically
highlighting the need to declare the challenged provision unconstitutional. There
is a dearth of relevant, reliable, and substantial evidence to support petitioners
theory that price control must continue even as Government is trying its best to
get out of regulating the oil industry. The facts of the petition are, in the main, a
general dissertation on the evils of monopoly.
Petitioner overlooks the fact that Congress enacted the deregulation law exactly
because of the monopoly evils he mentions in his petition. Congress instituted the
lifting of price controls in the belief that free and fair competition was the best
remedy against monopoly power. In other words, petitioners facts are also the
reasons why Congress lifted price controls and why the President accelerated the
process. The facts adduced in favor of continued and indefinite price control are

the same facts which supported what Congress believes is an exercise of wisdom
and discretion when it chose the path of speedy deregulation and rejected
Congressman Garcias economic theory.
The petition states that it is using the very thoughts and words of the Court in its
Tatad decision. Those thoughts and words, however, were directed against the
tariff differential, the inventory requirement, and predatory pricing, not against
deregulation as a policy and not against the lifting of price controls.
A dramatic, at times expansive and grandiloquent, reiteration of the same
background circumstances narrated in Tatad does not squarely sustain petitioners
novel thesis that there can be deregulation without lifting price controls.
Petitioner may call the industry subject to price controls as deregulated. In
enacting the challenged provision, Congress, on the other hand, has declared that
any industry whose prices and profits are fixed by government authority remains
a highly regulated one.
Petitioner, therefore, engages in a legal paradox. He fails to show how there can
be deregulation while retaining government price control. Deregulation means the
lifting of control, governance and direction through rule or regulation. It means
that the regulated industry is freed from the controls, guidance, and restrictions to
which it used to be subjected. The use of the word partial to qualify deregulation
is sugar-coating. Petitioner is really against deregulation at this time.
Petitioner argues further that the public interest requires price controls while the
oligopoly exists, for that is the only way the public can be protected from
monopoly or oligopoly pricing. But is indefinite price control the only feasible and
legal way to enforce the constitutional mandate against oligopolies?
Article 186 of the Revised Penal Code, as amended, punishes as a felony the
creation of monopolies and combinations in restraint of trade. The Solicitor
General, on the other hand, cites provisions of R.A. 8479 intended to prevent
competition from being corrupted or manipulated. Section 11, entitled Anti-Trust
Safeguards, defines and prohibits cartelization and predatory pricing. It penalizes
the persons and officers involved with imprisonment of three (3) to seven (7)
years and fines ranging from One million to Two million pesos. For this purpose, a
Joint Task Force from the Department of Energy and Department of Justice is
created under Section 14 to investigate and order the prosecution of violations.
Sections 8 and 9 of the Act, meanwhile, direct the Departments of Foreign Affairs,
Trade and Industry, and Energy to undertake strategies, incentives and benefits,
including international information campaigns, tax holidays and various other
agreements and utilizations, to invite and encourage the entry of new
participants. Section 6 provides for uniform tariffs at three percent (3%).
Section 13 of the Act provides for Remedies, under which the filing of actions by
government prosecutors and the investigation of private complaints by the Task
Force is provided. Sections 14 and 15 provide how the Department of Energy shall
monitor and prevent the occurrence of collusive pricing in the industry.
It can be seen, therefore, that instead of the price controls advocated by the
petitioner, Congress has enacted anti-trust measures which it believes will
promote free and fair competition. Upon the other hand, the disciplined,
determined, consistent and faithful execution of the law is the function of the
President. As stated by public respondents, the remedy against unreasonable
price increases is not the nullification of Section 19 of R.A. 8479 but the setting
into motion of its various other provisions.

For this Court to declare unconstitutional the key provision around which the laws
anti-trust measures are clustered would mean a constitutionally interdicted
distrust of the wisdom of Congress and of the determined exercise of executive
power.
Having decided that deregulation is the policy to follow, Congress and the
President have the duty to set up the proper and effective machinery to ensure
that it works. This is something which cannot be adjudicated into existence. This
Court is only an umpire of last resort whenever the Constitution or a law appears
to have been violated. There is no showing of a constitutional violation in this
case.
STANDARD OIL CO VS US
FACTS:
The Standard Oil Company initially became very successful in the petroleum
industry by using alternative types of technology in oil refinery. Under the
direction of John D. Rockefeller, Sr., the Standard Oil Company eventually
expanded its company by acquiring its competitors. By 1906, Standard Oil
controlled over 75 percent of the oil production in the United States.
The federal government ultimately filed suit against the company for allegedly
engaging in anti-competitive practices in violation of the Sherman Anti-Trust Act.
The suit maintained that while purchasing the competition was not technically
illegal, the practice violated the Sherman Anti-Trust Act because it stifled
competition. The suit also alleged that the Standard Oil Company also engaged in
other prohibited actions, such as threatening distributors that did not purchase its
petroleum and undercutting its oil prices to force other companies out of business.
ISSUE:
HELD:
The Court found that the Standard Oil Company violated the Sherman Anti-Trust
Act and ordered its dissolution into smaller companies. Chief Justice Edward White
wrote the majority opinion.
In reaching its decision, the Supreme Court determined that the term restraint of
trade had come to include the formation of monopolies and their consequences.
As detailed by the Court, the consequences that violated the Sherman Anti-Trust
Act included higher prices, reduced output, and reduced quality.
The Court further concluded that the Sherman Anti-Trust Act only prohibited
contracts that unduly restrained trade. The Anti-Trust Act of July 2, 1890, c.
647, 26 Stat. 209, should be construed in the light of reason; and, as so
construed, it prohibits all contracts and combination which amount to an
unreasonable or undue restraint of trade in interstate commerce, the Chief
Justice wrote.
In interpreting the Sherman Anti-Trust Act, the Court looked to the common law as
well as the underlying policy considerations behind the statute. As the Chief
Justice explained:
The Anti-Trust Act of 1890 was enacted in the light of the then existing practical
conception of the law against restraint of trade, and the intent of Congress was
not to restrain the right to make and enforce contracts, whether resulting from
combinations or otherwise, which do not unduly restrain interstate or foreign
commerce, but to protect that commerce from contracts or combinations by

methods, whether old or new, which would constitute an interference with, or an

undue restraint upon, it.
Under this legal framework, the Court concluded: The combination of the
defendants in this case is an unreasonable and undue restraint of trade in
petroleum and its products moving in interstate commerce, and falls within the
prohibitions of the act as so construed.