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151 SCRA 372 (June 30, 1987)
Topic: Corporate Entity, Disregarding the corporate entity
1. The services of Barretto was requested to initiate the incorporation of
Filipinas Orient Airways (FOA).
2. Barretto was referred to as the moving spirit of said corporation because it
was through his effort that it was created. Before FOAs creation though,
Barretto contracted with a third party, Alberto Arellano, for the latter to
prepare a project study for the feasibility of creating a corporation like FOA.
3. The project study was then presented to the would-be incorporators and
4. On the basis of said project study, Fermin Caram, Jr. and Rosa Caram agreed
to be incorporators of FOA. Later however, Arellano filed a collection suit
against FOA, Barretto, and the Carams.
5. Arellano claims that he was not paid for his work on the project study.
6. Lower Court: Orders the Carams to jointly and severally pay Arellano
P50,000.00 for the preparation of the project study and his technical services
that led to the organization of the defendant corporation, plus P10,000.00
attorneys fees
- It was upon the request of Barretto and Garcia that Arellano handled the
preparation of the project study which project study was presented to
Caram so the latter was convinced to invest in the proposed airlines.
- The project study was revised for purposes of presentation to financiers
and the banks. It was on the basis of this study that defendant corporation
was actually organized and rendered operational.
- Garcia and Caram, and Barretto became members of the Board and/or
officers of defendant corporation
- All the other defendants who were involved in the preparatory stages of
the incorporation must be liable
7. The petitioners claim that this order has no support in fact and law because
they had no contract whatsoever with the private respondent regarding the
above-mentioned services.
8. Their position is that as mere subsequent investors in the corporation that
was later created, they should not be held solidarily liable with FOA, a
separate juridical entity, and with Barretto and Garcia (their co-defendants in
the lower court) who were the ones who requested the said services from
Whether or not petitioners themselves are also personally liable for such expenses
and, if so, to what extent? NO. The petitioners did not contract the services of
Arellano. It was only the results of such services that Barretto and Garcia presented
to them and which persuaded them to invest in the proposed airline.

GRANTED. Petitioners are not liable.

The petitioners were not really involved in the initial steps that finally led to the
incorporation of FAO, which were being directed by Barretto as the main promoter. It
was he who was putting all the pieces together. The airline was eventually
organized on the basis of the project study with the petitioners as major
stockholders and, together with Barretto and Garcia, as principal officers. The
petitioners were merely among the financiers whose interest was to be invited and
who were in fact persuaded, on the strength of the project study, to invest in the
proposed airline.
There was no showing that FAO was a fictitious corporation and did not have a
separate juridical personality, to justify making the petitioners, as principal
stockholders thereof, responsible for its obligations. As a bona fide corporation, FAO
should alone be liable for its corporate acts as duly authorized by its officers and
The petition is rather hazy and seems to be flawed by an ambiguous ambivalence. It
is unnecessary to examine at this time the rules on solidary obligations, which the
parties-needlessly, as it turns out have belabored unto death.