Professional Documents
Culture Documents
Reviewer
Reviewer
Reviewer
In Partial Fulfilment
Of the Requirements for the Subject
Law 321 (Corporation Law)
Corporation Law
Case Digest
Submitted to:
Atty. Maria Lulu G. Reyes
Submitted by:
ARUMIN, Lesley Jane B.
BAGUIDUDOL, Valentin Jr. G.
BAGUILAT, Lauriz G.
BUENO, Marc Crisante C.
CAMSOL, Haryeth M.
LUBANTE, Jessica B.
ORALLO, Joanna Marie C.
ORAS, Phylian Corazon W.
SANTOS, Hyacinth B.
SECTEL, Florence O.
TUGUIC, Joshua B.
Date Submitted:
March 8, 2014
General Principles
1.
2.
3.
4.
B.
C.
D.
Classification of Corporations
1.
2.
3.
4.
5.
6.
7.
Promotion
March II Marketing v. Joson, December 12, 2011 _______________32
Cagayan Fishing v. Sandiko, 65 P 223
Caram v. CA, 151 S 372
Pioneer Insurance v. CA, 175 S 668
Rizal Light v. Municipality of Morong, 25 S 258
2.
3.
Incorporation
Organization
2.
3.
4.
5.
6.
7.
8.
Capital Stock
a)
Authorized (Sec. 12)
b)
Subscribed (Sec. 13)
c)
Paid-up (Sec 13)
d)
e)
9.
10.
11.
12.
13.
E.
F.
G.
II.
H.
I.
J.
Nature of Office
Requirements
1.
2.
3.
4.
Residence
Nationality
4 | Page
D.
E.
Term of Office/Holdover
Seneres v. COMELEC and Robles, April 16, 2009 _______________104
F.
G.
H.
I.
J.
2.
3.
5 | Page
4.
K.
2.
Personal
3.
Self-Dealing Director/Officer
Cojuangco v. Republic, 12 April 2011 _________________________170
Mead v. McCullough, 21 P 95
Prime White Cement v. IAC, 220 SCRA 103
4.
5.
Disloyalty
Gokongwei Jr. V. SEC, 89 SCRA 336 __________________________175
Strong v. Repide, 41 P 947
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III.
6.
Watered Stocks
Lirag Textile Mills v. SSS, 31 August 1987 ______________________177
Nava v. Peers Marketing, 25 November 1976
7.
In General (Sec. 36 in rel. to Arts. 44-46 of the Civil Code of the Philippines)
1.
2.
3.
4.
5.
6.
7.
Other Powers
B.
C.
7 | Page
D.
To
E.
To Sell Or Otherwise Dispose Of All or Substantially All Of Corporate Assets
(Sec. 40)
In relation to Bulk Sales Law
PNB v. Andrada Electric, 381 S 244 __________________________________211
Islamic Directorate v. CA, 272 S 454
Edward J. Nell Co. v. Pacific Farms, 15 S 415
Esguerra v. CA, 3 February 1997
Lopez Realty v. Fontecha, 247 S 183
F.
G.
H.
To Declare Dividends
1.
2.
3.
I.
To
J.
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IV.
Function
Nakpil v. IBC, 370 S 653 ___________________________________________240
PMI Colleges v. NLRC, 277 S 462
Loyola Grand Villas v. CA, 276 S 681
Citibank NA v. Chua, 220 S 75
B.
Kinds
C.
D.
E.
V.
2.
VI.
1.
B.
When and where held (Secs. 50, 51 and 52 in rel. to Sec 93)
C.
D.
E.
F.
VOTING
A.
B.
C.
D.
E.
F.
G.
VII.
2.
3.
4.
5.
6.
7.
8.
9.
B.
C.
3.
4.
5.
Common v. Preferred
Kinds of Preferred Shares
Founders Shares (Sec. 7)
6.
7.
Treasury (Sec. 9)
CIR v. Manning, 66 S 14 _____________________________________275
San Miguel Corporation v. Sandiganbayan, 14 September 2000
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D.
What is an issue
E.
What
F.
Acquisition and Ownership of Shares in a Corporation; Extent of Proprietary
Right/Doctrine of Limited Liability
G.
H.
I.
Unpaid Subscriptions
1.
2.
3.
J.
b)
4.
5.
6.
7.
VIII.
K.
Right
L.
M.
2.
3.
4.
B.
C.
IX.
X.
F.
APPRAISAL RIGHT
A.
B.
C.
D.
E.
XI.
XII.
A.
B.
C.
D.
E.
F.
G.
H.
I.
CLOSE CORPORATIONS
A.
B.
C.
SPECIAL CORPORATIONS
A.
B.
XIV.
Educational corporations
1.
Distinguished from ordinary stocks / Non-Stock Corporations
2.
Art. IV, Sec. 28 (3) in rel. to Art. XIV, Sec. 4 (2)(3)(4), 1987 Constitution
Religious corporations
1.
2.
Corporation sole
3.
Corporation aggregate
IEMELIF, Inc., et al. v. Bishop Lazaro, et al., 6 July 2010 _______363
IEMELIF, Inc., et al. v. Juane, 18 September 2009
DISSOLUTION OF CORPORATIONS
A.
Methods
1.
B.
Voluntary
a.
b.
2.
3.
Methods
Metropolitan v. Centro Development, 13 June 2012 _________369
Metropolitan Bank Inc. v. Riverside Mills, 8 September 2010
Yam v. CA, 303 S 1
Alhambra Cigar and Cigarette Mfg. v. 24 S 269
Chungka Bio v. IAC, 26 July 1988
Republic v. Marsman Dev., 27 April 1972
Tan Tiong Bio v. CIR, 4S 986
2.
Duration
Reynolds, Phil. V. ca, 169 s 220 ___________________________376
Mambulao v. PNB, 22 S 359
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3.
XV.
FOREIGN CORPORATIONS
A.
B.
Documentary
Georg Grotjahn vs. Isnani, 235 SCRA 216 __________________388
2.
Deposit
3.
C.
Applicable laws
D.
Amendment of License
Aetna Casualty vs. Pacific Star, 29 December 1977 __________________390
Bulakhidas vs. Navarro, 7 April 1986
Shmid and Oberly vs RJL, 18 October 1988
E.
II.
A.
B.
C.
III.
IV.
B.
C.
D.
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II.
III.
Capital Markets
1.
Equities Capital (e.g. stock market)
2.
Debt Capital (e.g. money market or bond market)
B.
Non-Capital Markets
1.
Commodities Market
2.
Foreign Exchange Market
3.
Options Market
REGISTRATION OF SECURITIES
A.
B.
C.
What
D.
E.
F.
Public Companies
Philippine Veterans Bank v. Callangan, 3 August 2011
G.
H.
I.
J.
TRADING IN SECURITIES
A.
B.
Brokers/Dealers: Chinese Wall; Self-Regulatory Organizations; Stock
Exchange
C.
Regulation of Options Trading (Sec. 25)
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Option
Put
Call
Straddle or Spread
D.
E.
F.
3.
IV.
V.
LIABILITIES
A.
B.
C.
D.
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CORPORATION CODE
(Batas Pambansa Blg. 68)
Formation and Organization of Corporations
Attributes of Corporation
PETRON CORPORATION
vs.
NATIONAL COLLEGE OF BUSINESS AND ARTS
G.R. No. 155683. February 16, 2007
FACTS:
The V. Mapa properties owned by Felipe and Enrique Monserrat, Jr., were mortgaged to DBP as
part of the security for the loan of P5.2 million by MYTC and Monserrat Co. MYTC mortgaged four
parcels of land located in Manila. One-half of Felipes undivided interest in the V. Mapa properties was
levied upon in execution of a money judgment rendered by the RTC in the Manila case. DBP challenged
the levy through a third-party claim asserting that the V. Mapa properties were mortgaged to it and
were, for that reason, exempt from levy or attachment. The RTC quashed it. MYTC and the Monserrats
got DBP to accept a dacion en pago arrangement whereby MYTC conveyed to the bank the four
mortgaged Quiapo properties as full settlement of their loan obligation. But despite this agreement, DBP
did not release the V. Mapa properties from the mortgage. Felipe, acting for himself and as Enriques
attorney-in-fact, sold the V. Mapa properties to respondent NCBA. The Monserrats failed to comply with
this undertaking. This instigated the civil action filed by NCBA.
During the pendency of the case, of Enriques undivided interest in the V. Mapa properties was
levied on in execution of a judgment of the Makati case holding him liable to Petron on a 1972
promissory note. Petron, the highest bidder, acquired both Felipes and Enriques undivided interests in
the property. Petron intervened in the NCBA case.
ISSUE:
Whether or not Petron should be held liable for exemplary damages and attorneys fees.
RULING:
NO.
Article 2208(5) contemplates a situation where one refuses unjustifiably and in evident bad faith
to satisfy anothers plainly valid, just and demandable claim, compelling the latter needlessly to seek
redress from the courts. In such a case, the law allows recovery of money the plaintiff had to spend for a
lawyers assistance in suing the defendant expenses the plaintiff would not have incurred if not for the
defendants refusal to comply with the most basic rules of fair dealing. It does not mean, however, that
the losing party should be made to pay attorneys fees merely because the court finds his legal position
to be erroneous and upholds that of the other party, for that would be an intolerable transgression of
the policy that no one should be penalized for exercising the right to have contending claims settled by a
court of law. In fact, even a clearly untenable defense does not justify an award of attorneys fees unless
it amounts to gross and evident bad faith.
No gross and evident bad faith could be imputed to Petron merely for intervening in NCBAs suit
against DBP and the Monserrats in order to assert what it believed and had good reason to believe. The
rule in this jurisdiction is that the plaintiff must show that he is entitled to moral, temperate or
compensatory damages before the court may even consider the question of whether exemplary damages
should be awarded. No exemplary damages may be awarded without the plaintiffs right to moral,
temperate, liquidated or compensatory damages having first been established.
ASSET PRIVATIZATION TRUST
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ISSUE:
Whether or not the BSP is public corporation.
RULING:
YES.
BSP is a public corporation and its funds are subject to the COAs audit jurisdiction. It is a public
corporation or a government agency or instrumentality with juridical personality, which does not fall
within the constitutional prohibition in Article XII, Section 16, notwithstanding the amendments to its
charter. Not all corporations, which are not government owned or controlled, are ipso facto to be
considered private corporations as there exist another distinct class of corporations or chartered
institutions which are otherwise known as "public corporations." These corporations are treated by law
as agencies or instrumentalities of the government which are not subject to the tests of ownership or
control and economic viability but to different criteria relating to their public purposes/interests or
constitutional policies and objectives and their administrative relationship to the government or any of
its Departments or Offices.
Note that the Administrative Code of 1987 designates the BSP as one of the attached agencies of
the Department of Education, Culture and Sports ("DECS"). An "agency of the Government" is defined as
referring to any of the various units of the Government including a department, bureau, office, and
instrumentality, government-owned or -controlled corporation, or local government or distinct unit
therein. BSP still remains an instrumentality of the national government. It is a public corporation
created by law for a public purpose, attached to the DECS pursuant to its Charter and the
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FACTS:
During a spot audit in 1977, the auditors from the Philippine National Red Cross (PNRC)
headquarters discovered a case shortage in the funds of its Bohol chapter. The chapter administrator,
petitioner Baluyot, was held accountable and thereafter, respondent Holganza as member of the board
Bohol chapter, filed a complaint with the Ofc. of the Ombudsman for malversation.
Upon
recommendation of respondent Militante, an administratiave docket of dishonesty was also opened
against Baluyot. Baluyot raised the defense that the Ombudsman had no jurisdiction as he had
authority only over government owned or controlled corporations which the PNRC was not. She gives as
evidence of its private character 1) it does not receive budgetary support from the government and all
money given to it by the latter and its instrumentalities become private funds of the organization. 2)
funds for the payment of personnels salaries and other emoluments come from yearly fund campaigns,
private contributions and rentals from its properties. 3) it is not audited by COA. PNRC, petitioner
claims falls under the International Federation of Red Cross, Swiss-based organization.
ISSUE:
Whether or not PNRC is a government owned or controlled corporation.
RULING:
YES.
PNRC is a government owned and controlled corporation, with an original charter under RA No.
95, as amended. The test to determine whether a corporation is government owned or controlled or
private in nature is simple. Is it created by its own charter for the exercise of a public function, or by
incorporation under the general corporation law? Those with special charters are government
corporations subject to its provisions, and its employees are under the jurisdiction of the Civil Service
Commission, and are compulsory members of the GSIS.
The PNRC was not impliedly converted to a private corporation simply because its charter was
amended to vest in it the authority to secure loans, be exempted from payment of all duties, taxes, fees
and other charges of all kinds on all importations and purchases for its exclusive use, on donations for
its disaster relief work and other services and in its benefits and fund raising drives. Clearly then,
public respondent has jurisdiction over the matter.
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Promotion
MARC II MARKETING, INC. and LUCILA V. JOSON
vs.
ALFREDO M. JOSON
G.R. No. 171993.December 12, 2011
FACTS:
Marc II Marketing, Inc. and Lucila Joson is assailing the decision of the CA for reversing and
settling aside the Resolution of the National Labor Relations Commission. Marc II Marketing, Inc. is a
corporation duly organized and existing under and by virtue of the laws of the Philippines. It is primarily
engaged in buying, marketing, selling and distributing in retail or wholesale for export or import
household appliances and products and other items. Petitioner Lucila is the President and majority
stockholder of the corporation. Before Marc II Marketing, Inc. was officially incorporated, Alfredo has
already been engaged by Lucila, in her capacity as President, to work as General Manager of the
corporation and it was formalized through the execution of a Management Contract dated in 1994 under
Marc Marketing, Inc., as Marc II Marketing, Inc. was yet to be incorporated. For occupying the said
position, respondent was among the corporations corporate officers by the express provision of Section
1, Article IV of its by-laws.
Alfredo was appointed as one of its officers with the designation or title of General Manager to
function as a managing director with other duties and responsibilities that the Board may provide and
authorized. However, in 1997, Marc II Marketing Inc. decided to stop and cease its operation as
evidenced by an Affidavit of Non-Operation due to poor sales collection aggravated by the inefficient
management of its affairs. Alfredo was informed of the cessation of its business operations and the
termination of his services as General Manager. He filed action for reinstatement and money claim
against petitioners.
ISSUE:
Whether or not Marc II Marketing Inc.s Board of Directors could create a position for corporate
officers through an enabling clause found in its corporate by-laws.
RULING:
YES.
The Court held that in the context of PD 902-A, corporate officers are those officers of a
corporation who are given that character either by the Corporation Code or by the corporations by-laws.
Section 25 of the Corporation Code specifically enumerated who are these corporate officers, namely:
president, secretary, treasurer and such other officers as may be provided for in the by-laws. A careful
examination of Marc II Marketing Inc.s by-laws, particularly paragraph 1, Section 1of Article IV explicitly
revealed that its corporate officers are composed only of chairman, president, one/more vice president,
treasurer and secretary. The position of general manager was not among those enumerated. Meanwhile,
paragraph 2, Section 1 of Article IV of the corporations by-laws empowered its Board of Directors to
appoint such officers as it may determine necessary or proper, making this an enabling provision for
approving a resolution to make the position of general manager a corporate officer. All of these acts were
done without first amending its by-laws so as to include the General Manager in its roster of corporate
officers. Though the Board of Directors may create appointive positions other than the positions of
corporate officers, the persons occupying such positions cannot be viewed as corporate officers under
Section 25 of the Corporation Code. The said provision of the Corporation Code safeguards the
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FACTS:
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. Their position is that
as mere subsequent investors in the corporation that was later created, they should not be held
solidarily liable with the Filipinas Orient Airways, 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 the private respondent.
ISSUE:
Whether or not the petitioners should be held liable.
RULING:
NO.
The petitioners were not involved in the initial stages of the organization of the airline. They 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 the Airline 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, the Airline should alone be liable for its corporate acts as
duly authorized by its officers and directors. Granting that the petitioners benefited from the services
rendered, such is no justification to hold them personally liable therefor. Otherwise, all the other
stockholders of the corporation, including those who came in late, and regardless of the amount of their
shareholdings, would be equally and personally liable also with the petitioner for the claims of the
private respondent.
Petitioners cannot be held personally liable for the compensation claimed by the private
respondent for the services performed by him in the organization of the corporation. To repeat, the
petitioners did not contract such services. 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. The most that
can be said is that they benefited from such services, but that surely is no justification to hold them
personally liable therefor.
A promoter could not have acted as agent for a corporation that had no legal existence. A
corporation, until organized, has no life therefore no faculties. The corporation had no juridical
personality to enter into a contract.
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Articles of Incorporation
JESUS V. LANUZA, MAGADYA REYES, BAYANI REYES and ARIEL REYES
vs.
COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION, DOLORES ONRUBIA, ELENITA
NOLASCO, JUAN O. NOLASCO III, ESTATE OF FAUSTINA M. ONRUBIA, PHILIPPINE MERCHANT
MARINE SCHOOL, INC.
G.R. No. 131394.March 28, 2005
FACTS:
Philippine Merchant Marine School, Inc. (PMMSI) had seven hundred founders shares and
seventy-six common shares as its initial capital stock subscription reflected in the articles of
incorporation. However, private respondents and their predecessors who were in control of PMMSI
registered the companys stock and transfer book for the first time in 1978, recording thirty-three (33)
common shares as the only issued and outstanding shares of PMMSI.
Sometime in 1979, a special stockholders meeting was called and held on the basis of what was
considered as a quorum of twenty-seven common shares, representing more than two-thirds of the
common shares issued and outstanding. In 1982, the heirs of one of the original incorporators, Juan
Acayan, filed a petition with the SEC for the registration of their property rights over one hundred (120)
founders shares and twelve (12) common shares owned by their father. The SEC held that the heirs
were entitled to the claimed shares and called for a special stockholders meeting to elect a new set of
officers. As a result, the shares of Acayan were recorded in the stock and transfer book.
A special stockholders meeting was held to elect a new set of directors. Private respondents
thereafter filed a petition with the SEC questioning the validity of the 06 May 1992 stockholders
meeting, alleging that the quorum for the said meeting should not be based on the 165 issued and
outstanding shares as per the stock and transfer book, but on the initial subscribed capital stock of
seven hundred seventy-six (776) shares, as reflected in the 1952 Articles of Incorporation.
ISSUE:
Whether or not the basis of quorum for a stockholders meeting is the outstanding capital stock
as indicated in the articles of incorporation.
RULING:
YES.
The stock and transfer book of PMMSI cannot be used as the sole basis for determining the
quorum as it does not reflect the totality of shares which have been subscribed, more so when the
articles of incorporation show a significantly larger amount of shares issued and outstanding as
compared to that listed in the stock and transfer book. A stock and transfer book is one which records
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Corporate Name
FRANCISCO M. ALONSO, substituted by his heirs
vs.
CEBU COUNTRY CLUB, INC.
G.R. No. 130876.January 31, 2002
FACTS:
Petitioner died pendente lite and substituted by his legal heirs, a lawyer by profession, the only
son and sole heir of the late Tomas N. Alonso and Asuncion Medalle, who died on June 16, 1962 and
August 18, 1963, respectively. Cebu Country Club, Inc. is a non-stock, non-profit corporation duly
organized and existing under Philippine Laws the purpose of which is to cater to the recreation and
leisure of its members.
Sometime in 1992, petitioner discovered documents and records of Friar Lands Sale Certificate
Register/Instalment Record Certificate No. 734, Sales Certificate No. 734 and Assignment of Sales
Certificate showing that his father acquired Lot No. 727 of the Banilad Friar Lands Estate from the
Government of the Philippine Islands in or about the year 1911 in accordance with the Friar Lands Act
(Act No. 1120). The documents show that one Leoncio Alburo, the original vendee of Lot No. 727,
assigned his sales certificate to petitioners father on December 18, 1911, who completed the required
instalment payments thereon under Act No. 1120 and was consequently issued Patent No. 14353 on
March 24, 1926. On March 27, 1926, the Director of Lands, acting for and in behalf of the government,
executed a final deed of sale in favor of petitioners father Tomas N. Alonso. It appears, however, that the
deed was not registered with the Register of Deeds because of lack of technical requirements, among
them the approval of the deed of sale by the Secretary of Agriculture and Natural Resources, as required
by law.
ISSUE:
Whether or not the Court of Appeals erred in sustaining respondents claim of ownership over Lot
No. 727.
RULING:
YES.
Under Act No. 1120, which governs the administration and disposition of friar lands, the
purchase by an actual and bona fide settler or occupant of any portion of friar land shall be "agreed
upon between the purchaser and the Director of Lands, subject to the approval of the Secretary of
Agriculture and Natural Resources (mutatis mutandis)."
The instruments do not bear the signature of the Director of Lands and the Secretary of the
Interior. They also do not bear the approval of the Secretary of Agriculture and Natural Resources. The
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Primary Purpose
ALICIA E. GALA, GUIA G. DOMINGO and RITA G. BENSON
vs.
ELLICE AGRO-INDUSTRIAL CORPORATION, MARGO MANAGEMENT AND DEVELOPMENT
CORPORATION, RAUL E. GALA, VITALIANO N. AGUIRRE II, ADNAN V. ALONTO, ELIAS N.
CRESENCIO, MOISES S. MANIEGO, RODOLFO B. REYNO, RENATO S. GONZALES, VICENTE C.
NOLAN, NESTOR N. BATICULON
G.R. No. 156819. December 11, 2003
FACTS:
On March 28, 1979, the Ellice Agro-Industrial Corporation was formed and organized. The total
subscribed capital stock of the corporation was P3.5 Million with 35,000 shares. Additional shares were
acquired and subscribed from said corporation. Subsequently, on September 16, 1982, the Margo
Management and Development Corporation (Margo) was incorporated. The total subscribed capital
stock of Margo was 20,000 shares at P200, 000.00. Several transfers of shares of Ellice to Margo were
made by the stockholders and some payments of subscription were made by transferring parcels of land
by the Gala Spouses.
In essence, petitioners want this Court to disregard the separate juridical personalities of Ellice
and Margo for the purpose of treating all property purportedly owned by said corporations as property
solely owned by the Gala spouses. The petitioners contention in support of this theory is that the
purposes for which Ellice and Margo were organized should be declared as illegal and contrary to public
policy. They claim that the respondents never pursued exemption from land reform coverage in good
faith and instead merely used the corporations as tools to circumvent land reform laws and to avoid
estate taxes. Specifically, they point out that respondents have not shown that the transfers of the land
in favor of Ellice were executed in compliance with the requirements of Section 13 of R.A. 3844.
Furthermore, they alleged that respondent corporations were run without any of the conventional
corporate formalities.
ISSUE:
policy.
Whether or not the purpose of the creation of the two corporations is illegal and against public
RULING:
NO.
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UY SIULIONG, MARIANO LIMJAP, GACU UNG JIENG, EDILBERTO CALIXTO and UY CHO YEE
vs.
THE DIRECTOR OF COMMERCE AND INDUSTRY
G.R. No.L-15429. December 1, 1919
FACTS:
Prior to the presentation of the petition the petitioners had been associated together as partners,
which partnership was known as "mercantil regular colectiva, under the style and firm name of
"Siuliong y Cia. That the petitioners herein, who had theretofore been members of said partnership of
"Siuliong y Cia.," desired to dissolve said partnership and to form a corporation composed of the same
persons as incorporators, to be known as "Siulong y Compaia, Incorporada.
While the articles of incorporation of "Siuliong y Cia., Inc." states that its purpose is to acquire
and continue the business, with some of its objects or purposes, of Siuliong & Co., it will be found upon
an examination of the purposes enumerated in the proposed articles of incorporation of "Siuliong y Cia.,
Inc.," that some of the purposes of the original partnership of "Siuliong y Cia." have been omitted.
ISSUE:
Whether or not a corporation can engage in other purposes other than that stated in the purpose
clause of its articles of incorporation.
RULING:
YES.
A corporation may be organized under the laws of the Philippine Islands for mercantile purposes,
and to engage in such incidental business as may be necessary and advisable to give effect to, and aid
in, the successful operation and conduct of the principal business. All of the power and authority
included in the articles of incorporation of "Siuliong y Cia., Inc.," enumerated above in paragraph 4 of
the Articles of Incorporation are only incidental to the principal purpose of said proposed incorporation,
to wit: "mercantile business." The purchase and sale, importation and exportation of the products of the
country, as well as of foreign countries, might make it necessary to purchase and discount promissory
notes, bills of exchange, bonds, negotiable instruments, stock, and interest in other mercantile and
industrial associations. It might also become important and advisable for the successful operation of
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Principal Office/Domicile
DAVAO LIGHT & POWER CO., INC.
vs.
THE HON. COURT OF APPEALS, HON. RODOLFO M. BELLAFLOR, Presiding Judge of Branch 11,
RTC-Cebu and FRANCISCO TESORERO
G.R. No. 111685.August 20, 2001
FACTS:
In 1992 Davao Light & Power Co., Inc. filed a complaint for damages against private respondent
Francisco Tesorero before the Regional Trial Court of Cebu for damages in the amount of P11,
000,000.00. In turn, the latter filed a motion to dismiss claiming among others that the venue was
improperly laid since the principal place of business of the plaintiff is Davao City as indicated in the
lease executed by petitioner, and the same determines the venue of the action, instead of Banilad City
which the company indicated in its complaint. The trial court granted the said motion. Petitioners
motion for reconsideration was denied, as well as its appeal to the Court of Appeals. Hence, this petition.
ISSUE:
Whether or not the companys principal place is in Davao City.
RULING:
YES.
Davao City is the Principal place of business which determines venue. A corporation has no
residence in the same sense in which this term is applied to a natural person. But for practical
purposes, a corporation is in a metaphysical sense a resident of the place where its principal office is
located as stated in the articles of incorporation. The Corporation Code precisely requires each
corporation to specify in its articles of incorporation the "place where the principal office of the
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RULING:
NO.
In this case, the suit for damages filed with the city court is based upon tort and not upon a
written contract. Section 1 of Rule 4 of the New Rules of Court, governing venue of actions in inferior
courts, provides in its paragraph (b)(3) that when "the action is not upon a written contract, then in the
municipality where the defendant or any of the defendants resides or may be served with summons."
Settled is the principle in corporation law that the residence of a corporation is the place where its
principal office is established. Since it is not disputed that the Clavecilla Radio System has its principal
office in Manila, it follows that the suit against it may properly be filed in the City of Manila.
The appellee maintain, however, that with the filing of the action in Cagayan de Oro City, venue
was properly laid on the principle that the appellant may also be served with summons in that city
where it maintains a branch office. The term "may be served with summons" does not apply when the
defendant resides in the Philippines for, in such case, he may be sued only in the municipality of his
residence, regardless of the place where he may be found and served with summons. As any other
corporation, the Clavecilla Radio System maintains a residence which is Manila in this case, and a
person can have only one residence at a time (See Alcantara vs. Secretary of the Interior, 61 Phil. 459;
Evangelists vs. Santos, 86 Phil. 387). The fact that it maintains branch offices in some parts of the
country does not mean that it can be sued in any of these places. To allow an action to be instituted in
any place where a corporate entity has its branch offices would create confusion and work untold
inconvenience to the corporation.
JOHN SY and UNIVERSAL PARTS SUPPLY CORPORATION
vs.
TYSON ENTERPRISES, INC., JUDGE GREGORIO G. PINEDA of the Court of First Instance of Rizal,
Pasig Branch XXI and COURT OF APPEALS
G.R. No.L-56763. December 15, 1982
FACTS:
On August 29, 1979, Tyson Enterprises, Inc. filed against John Sy and Universal Parts Supply
Corporation, residents of Bacolod, a complaint for the collection of money in Pasig, Rizal. However, there
is no allegation in the complaint as to the office or place of business of plaintiff Tyson Enterprises, Inc.,
which is located in Manila. What is alleged is the postal address or residence of Dominador Ti, the
president and general manager of plaintiff firm, which is in San Juan, Rizal.
Defendant Sy and Universal Parts Supply Corporation filed a motion to dismiss on the ground of
improper venue. The plaintiff opposed the motion to dismiss which the trial court denied. On appeal,
the Appellate Court dismissed the petition. It ruled that the parties did not intend Manila as the
exclusive venue of the actions arising under their transactions and that since the action was filed in
Pasig, which is near Manila, no useful purpose would be served by dismissing the same and ordering
that it be filed in Manila.
ISSUE:
Whether or not venue was improperly laid in this case.
RULING:
YES.
The place of business of plaintiff Tyson Enterprises, Inc., which for purposes of venue is
considered as its residence is in Manila and not in Rizal. The residence of its president is not the
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Term
ALHAMBRA CIGAR & CIGARETTE MANUFACTURING COMPANY, INC.
vs.
SECURITIES & EXCHANGE COMMISSION
G.R. No. L-23606.July 29, 1968
FACTS:
Incorporated under Philippine laws on January 15, 1912, petitioner Alhambra Cigars Mfg. Co
(ACCMI) was to exist for fifty (50) years from incorporation. Its term of existence expired on January 15,
1962. On that date, it ceased transacting business and entered into a state of liquidation.
Thereafter, a new corporation Alhambra Industries, Inc. was formed to carry on the business of
Alhambra. On May 1, 1962, Alhambra's stockholders, by resolution, named Angel S. Gamboa trustee to
take charge of its liquidation. On June 20, 1963,within Alhambra's three-year statutory period for
liquidation Republic Act 3531 was enacted into law amending Section 18 of the Corporation Law and
enabling domestic private corporations to extend their corporate life beyond the period fixed by the
articles of incorporation for a term not to exceed fifty years in any one instance.
On July 15, 1963 Alhambra's board of directors resolved to amend paragraph "Fourth" of its
articles of incorporation to extend its corporate life for an additional fifty years, or a total of 100 years
from its incorporation. Its stockholders, representing more than two-thirds of its subscribed capital
stock, voted to approve the foregoing resolution. SEC, however, returned said amended articles of
incorporation with the ruling that RA 3531 which took effect only on June 20, 1963, cannot be availed
of by the said corporation, for the reason that its term of existence had already expired when the said
law took effect; in short, said law has no retroactive effect."
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ISSUE:
Whether or not the correct paid-up capital of MSCI for the pertinent period covered by the
application for exemption is P5 million, not P64,688,528.00.
RULING:
YES.
It is P5 million. The Supreme Court held that in the case under consideration, there is no
dispute, and the Board even mentioned in its August 17, 1993 Decision, that MSCI was organized and
incorporated on February 15, 1990 with an authorized capital stock of P60 million, P20 million of which
was subscribed. Of the P20 million subscribed capital stock, P5 million was paid-up. This fact is only
too glaring for the Board to have been misled into believing that MSCI'S paid-up capital stock was P64
million plus and not P5 million.
Power to increase or decrease capital stock; incur, create or increase bonded indebtedness. No
corporation shall increase or decrease its capital stock or incur, create or increase any bonded
indebtedness unless approved by a majority vote of the board of directors and, at a stockholders'
meeting duly called for the purpose, two-thirds (2/3) of the outstanding capital stock shall favor the
increase or diminution of the capital stock, or the incurring, creating or increasing of any bonded
indebtedness.
The above requirements, which are condition precedents before the capital stock of a corporation
may be increased, were unquestionably not observed in this case. Henceforth, the paid-up capital stock
of MSCI for the period covered by the application for exemption still stood at P5 million. The losses,
therefore, amounting to P3,400,738.00 for the period February 15, 1990 to August 31, 1990 impaired
MSCI's paid-up capital of P5 million by as much as 68%. Likewise, the losses incurred by MSCI for the
interim period from September 1, 1990 to November 30, 1990, as found by the Commission, per MSCI's
quarterly income statements, amounting to P13,554,337.33 impaired the company's paid-up capital of
P5 million by a whopping 271.08%, more than enough to qualify MSCI as a distressed employer.
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TIMOTEO H. SARONA
vs.
NATIONAL LABOR RELATIONS COMMISSION, ROYALE SECURITY AGENCY (FORMERLY SCEPTRE
SECURITY AGENCY) and CESAR S. TAN
G.R. No. 185280. January 18, 2012
FACTS:
Petitioner, a security guard in Sceptre since April 1976, was asked by Sceptres operations
manager to submit a resignation letter as a requirement for an application in Royale and to fill up an
employment application form for the said company. He was then assigned at Highlight Metal Craft Inc.
from July 29 to August 8, 2003 and was later transferred to Wide Wide World Express Inc.
On September 2003, he was informed that his assignment at WWWE Inc. was withdrawn because
Royale has been allegedly replaced by another security agency which he later discovered to be untrue.
Nevertheless, he was once again assigned at Highlight Metal sometime in September 2003and when he
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Marubeni Corporation is a foreign corporation organized under the laws of Japan. It was doing
business in the Philippines through its duly licensed, wholly owned subsidiary, Marubeni Philippines
Corporation. Petitioners Ryoichi Tanaka, Ryohei Kimura and Shoichi One were officers of Marubeni
assigned to its Philippine branch.
On January 27, 1989, Lirag filed with the RTC of Makati a complaint for specific performance
and damages in the sum of P6M as commission pursuant to an oral consultancy agreement with
Marubeni for obtaining government contracts of various projects. Lirag claimed that on February 2,
1987, petitioner Ryohei Kimura hired his consultancy group for the purpose of obtaining government
contracts of various projects. The agreement was merely oral because of the mutual trust between
Marubeni and the Lirag family which dates back to the 1960s. One of the projects handled by
respondent Lirag, the Bureau of Post project, amounting to P100,000,000.00 was awarded to the
Marubeni-Sanritsu tandem. Despite repeated demands of his 6% commission was never paid.
Marubeni claimed that Ryohei Kimura did not have the authority to enter into such agreement in
their behalf. Only the general manager, upon issuance of a SPA by the principal office in Tokyo, Japan,
could enter into any contract in behalf of the corporation. They also claimed that Marubeni never
participated in the Bureau of Post project nor benefited from such project.
ISSUE:
Whether or not there was a consultancy agreement to make Lirag entitled to commission.
RULING:
NO.
The only basis of Lirag in claiming from Marubeni was because he claims that they are sister
companies since Marubeni was the supplier and contractor of the Sanritsu. Not because two foreign
companies came from the same country and closely worked together on certain projects would the
conclusion arise that one was the conduit of the other, thus piercing the veil of corporate fiction.
The separate personality of the corporation may be disregarded only when the corporation is used
as a cloak or cover for fraud or illegality, or to work injustice, or where necessary for the protection of
creditors. Aside from the self-serving testimony of respondent regarding the existence of a close working
relationship between Marubeni and Sanritsu, there was nothing that would support the conclusion that
Sanritsu was an agent of Marubeni.
Any agreement entered into because of the actual or supposed influence which the party has,
engaging him to influence executive officials in the discharge of their duties, which contemplates the use
of personal influence and solicitation rather than an appeal to the judgment of the official on the merits
of the object sought is contrary to public policy. Consequently, the agreement, assuming that the
parties agreed to the consultancy, is null and void as against public policy.
Therefore, it is
unenforceable before a court of justice.
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SOL LAGUIO, RENE LAOLAO, ANNALIZA ENSANDO, EDELIZA ASAS, LILIA MARAY, EVELYN
UNTALAN,* ROSARIO CHICO, REYNALDO GARCIA, MERLITA DE LOS SANTOS,* JOSEPHINE
DERONG,* GEMMA TIBALAO BANTOLO, LUCY ALMONTE,* CRISPINA VANQUARDIA, NARCISA
VENZON, NORMA ELEGANTE,* AMELIA MORENO,* ABNER PETILOS, NARCISO HILAPO, DOLORES
OLAES, MELINDA LLADOC, ERNA AZARCON, and APRIL TOY, INC. WORKERS UNION ALAB
vs.
NATIONAL LABOR RELATIONS COMMISSION, WELL WORLD TOYS, INC., APRIL TOYS, INC., YU
SHENG LING, JENN L. WANG, EUCLIFF CHENG, CHI SHENG LIN, NENITA C. AGUIRRE, MA.
THERESA R. CADIENTE and GLICERIA R. AGUIRRE
G.R. No. 108936. October 4, 1996
FACTS:
Private respondent April Toy, Inc. is a domestic corporation, for the purpose of "manufacturing,
importing, exporting, buying , selling, sub-contracting or otherwise dealing in, at wholesale and retail,"
stuffed toys. On December 20, 1989, or after almost a year of operation, April posted a memorandum 2
within its premises and circulated a copy of the same among its employees informing them of its dire
financial condition. April decided to shorten its corporate term "up to February 28, 1990,
In view of April's cessation of operations, petitioners who initially composed of seventy-seven
employees below filed a complaint for "illegal shutdown/retrenchment/dismissal and unfair labor
practice." On June 21, 1990, petitioners amended their complaint to implead private respondent Well
World Toys, Inc. (Well World for brevity), a corporation also engaged in the manufacture of stuffed toys
for export.
Petitioners further alleged that the original incorporators and principal officers of April were
likewise the original incorporators of Well World, thus both corporations should be treated as one
corporation liable for their claims. The Labor Arbiter found as valid the closure of April, and treated
April and Well World as two distinct corporations.
ISSUE:
Whether or not April and Well World are two distinct corporations.
RULING:
YES.
The two corporations have two different set of officers managing their respective affairs in two
separate offices. It is basic that a corporation is invested by law with a personality separate and distinct
from those of the persons composing it as well as from that of any other legal entity to which it may be
related. Mere substantial identity of the incorporators of the two corporations does not necessarily imply
fraud, 15 nor warrant the piercing of the veil of corporate fiction. In the absence of clear and convincing
evidence that April and Well World's corporate personalities were used to perpetuate fraud, or
circumvent the law said corporations were rightly treated as distinct and separate from each other.
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De Facto Corporation
C. ARNOLD HALL and BRADLEY P. HALL, petitioners,
vs.
EDMUNDO S. PICCIO, Judge of the Court of First Instance of Leyte, FRED BROWN, EMMA
BROWN, HIPOLITA CAPUCIONG, in his capacity as receiver of the Far Eastern Lumber and
Commercial Co., Inc., respondents.
G.R. No. L-2598. June 29, 1950
FACTS:
In 1947, the petitioners and the respondents signed and acknowledged in Leyte, the article of
incorporation of the Far Eastern Lumber and Commercial Co., Inc., organized to engage in a general
lumber business to carry on as general contractors, operators and managers, etc. Attached to the article
was an affidavit of the treasurer stating that 23,428 shares of stock had been subscribed and fully paid
with certain properties transferred to the corporation described in a list appended thereto.
Immediately after the execution of said articles of incorporation, the corporation proceeded to do
business with the adoption of by-laws and the election of its officers.
In 1947, the said articles of incorporation were filed in the office of the SEC for the issuance of
the corresponding certificate of incorporation. Thereafter, pending action on the articles of incorporation
by the SEC, the respondents filed before the Court of First Instance of Leyte a civil case, alleging among
other things that the Far Eastern Lumber and Commercial Co. was an unregistered partnership; that
they wished to have it dissolved because of bitter dissension among the members, mismanagement and
fraud by the managers and heavy financial losses. The petitioners alleged that the court had no
jurisdiction over the civil case decree the dissolution of the company, because it being a de facto
corporation, dissolution thereof may only be ordered in a quo warranto proceeding instituted in
accordance with section 19 of the Corporation Law.
ISSUES:
Whether or not the Far Eastern Lumber and Commercial Co., Inc. is a de facto corporation.
RULING:
NO.
Inasmuch as the Far Eastern Lumber and Commercial Co., is a de facto corporation, section 19 of
the Corporation Law applies, and therefore the court had not jurisdiction to take cognizance of said civil
case.
There are least two reasons why this section does not govern the situation. (1) First, not having
obtained the certificate of incorporation, the Far Eastern Lumber and Commercial Co. even its
stockholders may not probably claim "in good faith" to be a corporation.
Under our statue it is to be noted that it is the issuance of a certificate of incorporation by the
Director of the Bureau of Commerce and Industry (now SEC) which calls a corporation into being. The
immunity if collateral attack is granted to corporations "claiming in good faith to be a corporation under
this act." Such a claim is compatible with the existence of errors and irregularities; but not with a total
or substantial disregard of the law. Unless there has been an evident attempt to comply with the law the
claim to be a corporation "under this act" could not be made "in good faith."
(2) Second, this is not a suit in which the corporation is a party. This is a litigation between
stockholders of the alleged corporation, for the purpose of obtaining its dissolution. Even the existence
of a de jure corporation may be terminated in a private suit for its dissolution between stockholders,
without the intervention of the state.
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Corporation by Estoppel
INTERNATIONAL EXPRESS TRAVEL & TOUR SERVICES
vs.
HON. COURT OF APPEALS, HENRI KAHN, PHILIPPINE FOOTBALL FEDERATION
G.R. No. 119002. October 19, 2000
FACTS:
Petitioner International Express Travel and Tour Services, Inc., through its managing director,
wrote a letter to the Philippine Football Federation (Federation), through its president private respondent
Henri Kahn, wherein the former offered its services as a travel agency to the latter, which was accepted.
Petitioner secured the airline tickets for the trips of the athletes and officials of the Federation which
amounted to P449,654.83. For failure to pay the unpaid amount after demands, the petitioner filed a
collection case against Henri Kahn in his personal capacity and as President of the Federation and
impleaded the Federation as an alternative defendant. Kahn denied liability and averred that it merely
acted as the agent of the Federation and did not guaranty the payment of the purchased tickets. The
trial court ruled against Kahn.
ISSUE:
Whether or not Kahn is personally liable.
RULING:
YES.
Kahn avers that he should not be made personally liable because it should be the Federation, as
a corporation having juridical existence, which must be held liable. He merely acted as an agent of the
latter.
The Court was not persuaded. It ruled that under R.A. 3135, and the Department of Youth and
Sports Development under P.D. 604, for a Federation to acquire juridical existence it is a requirement
that the federation must be recognized by the accrediting organization, the Philippine Amateur Athletic
Federation. And Kahn failed to prove that such requirement was complied with by the Federation. It is a
settled principal in corporation law that any person acting or purporting to act on behalf of a
corporation which has no valid existence assumes such privileges and becomes personally liable for
contract entered into or for other acts performed as such agent. 1 As president of the Federation, Henri
Kahn is presumed to have known about the corporate existence or non-existence of the Federation.
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them.
Lim asserts that he should not be made liable because there was no partnership existing between
The court ruled that there exist a partnership between them. It is clear that Chua, Yao and Lim
had decided to engage in a fishing business, which they started by buying boats worth P3.35 million,
financed by a loan secured from Jesus Lim who was petitioner's brother. In their Compromise
Agreement, they subsequently revealed their intention to pay the loan with the proceeds of the sale of
the boats, and to divide equally among them the excess or loss. These boats, the purchase and the
repair of which were financed with borrowed money, fell under the term "common fund" under Article
1767. The contribution to such fund need not be cash or fixed assets; it could be an intangible like
credit or industry. That the parties agreed that any loss or profit from the sale and operation of the
boats would be divided equally among them also shows that they had indeed formed a partnership.
Moreover, it is clear that the partnership extended not only to the purchase of the boat, but also
to that of the nets and the floats. The fishing nets and the floats, both essential to fishing, were
obviously acquired in furtherance of their business. It would have been inconceivable for Lim to involve
himself so much in buying the boat but not in the acquisition of the aforesaid equipment, without which
the business could not have proceeded.
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BOARD OF DIRECTORS
Qualifications/Qualifying Shares
REP. LUIS R. VILLAFUERTE, et al.
vs.
GOV. OSCAR S. MORENO, et al.
G.R. No. 186566, October 2, 2009
FACTS:
As a result of the Tokyo Communique, which unified the feuding Basketball Association of the
Philippines ("BAP") and the newly formed Pilipinas Basketbol ("PB"), the Samahang Basketbol ng
Pilipinas, Inc. ("SBP") was established and its constitutive documents consisting of the Articles of
Incorporation were signed by the five (5) incorporators, which include petitioner Pangilinan. On the
same day, the incorporators likewise passed and signed its by-laws. Subsequently, the three-man panel
met in Bangkok, Thailand where it forged and executed a Memorandum of Agreement ("Bangkok
Agreement") integrating therein the final terms and conditions of the unity and merger of BAP and PB.
Then came the nomination and election of its transitory officers for the years 2007-2008 the results of
which had led to the proclamation of respondent Villafuerte as Chairman. Petitioner raised its
opposition and did not recognize the election of respondent Villafuerte as Chairman of BAP-SBP on
account of the alleged failure of the latter to qualify for the said position. As a result of this, two
elections were held by the different factions for the positions in the Board of Trustees. Petitioners filed
before the Regional Trial Court of Manila a petition 5 for declaration of nullity of the election of
respondents as members of the Board of Trustees and Officers of BAP-SBP. The trial court rendered
decision in favor of the petitioners.
ISSUE:
Whether or not Villafuerte is qualified as a Director.
RULING:
NO.
Respondents asserted that Villafuerte never assumed the position of Chairman of the BAP-SBP
because he failed to qualify for the same; that before Villafuerte could legally assume the Chairmanship
of BAP-SBP, he must first be elected a member of the Board of Trustees.
As correctly pointed out by CA, petitioner Villafuertes nomination must of necessity be
understood as being subject to or in accordance with the qualifications set forth in the By-Laws of the
BAP-SBP. Since the said by-laws require the Chairman of the Board of Trustees to be a trustee himself,
petitioner Villafuerte was not qualified since he had neither been elected nor appointed as one of the
trustees of BAP-SBP. In other words, petitioner Villafuerte never validly assumed the position of
Chairman because he failed in the first place to qualify therefore.
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Disqualifications
ENRIQUE P. BRIAS Y ROXAS
vs.
JOHN S. HORD, et al.
1913 Feb 5, G.R. No. 8387
FACTS:
The petitioner was a duly elected member of the Board of BPI. When he requested before Hord,
the President of the company, an examination of the books and finances of the company, the same was
denied, even after repeated demands. Thereafter, he alleged that the respondents made it appear that
the petitioner had tendered a resignation and declared that his position was vacant. Hence the latter
filed this complaint demanding that he be reinstated from his former office.
ISSUE:
Whether or not the petitioner is entitled to the relief sought.
HELD:
YES.
Based from the documentary and testimonial evidence there is no clear showing that the
petitioner had actually resigned. The testimonies of the respondents posed several and fatal
inconsistencies while the testimony of the petitioner more or less proves what really transpired during
the meeting. With these, the petitioner is still entitled to his position and his request for examination of
the corporate books must be granted.
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Voting
WOLFGANG AURBACH, et al.
vs.
SANITARY WARES MANUFACTURING CORPORATION, et al.
1989 Dec 15, G.R. No. 75875
FACTS:
In 1961, Saniwares, a domestic corporation was incorporated for the primary purpose of
manufacturing and marketing sanitary wares. One of the incorporators, Mr. Baldwin Young went abroad
to look for foreign partners, European or American who could help in its expansion plans.
ASI, a foreign corporation domiciled in Delaware, United States entered into an Agreement with
Saniwares and some Filipino investors whereby ASI and the Filipino investors agreed to participate in
the ownership of an enterprise which would engage primarily in the business of manufacturing in the
Philippines and selling here and abroad vitreous china and sanitary wares. The parties agreed that the
business operations in the Philippines shall be carried on by an incorporated enterprise and that the
name of the corporation shall initially be "Sanitary Wares Manufacturing Corporation."
The conflict arose when there had dissentions from ASI for the proposed export expansion by the
other stockholders. When the next annual election of the Board came, further conflicts arose on the
manner of voting, it resulted to the uncertainty as to who were duly elected. The contending groups of
Lagdameo Group and ASI Group claim claimed to be the legitimate directors of the corporation.
ISSUE:
Whether or not Petitioners were the duly elected members of the Board.
HELD:
NO.
The Court ruled that Wolfgang Aurbach, John Griffin, David P Whittingham, Ernesto V.
Lagdameo, Baldwin Young, Raul A. Boncan, Ernesto R. Lagdameo, Jr., Enrique Lagdameo, and George
F. Lee as the duly elected directors of Saniwares at the March 8, 1983 annual stockholders meeting
were the duly elected members of the Board. Under their agreement, both parties were given the right
their shares cumulatively. ASI, however, should not be allowed to interfere in the voting within the
Filipino group. Otherwise, ASI would be able to designate more than the three directors it is allowed to
designate under the Agreement, and may even be able to get a majority of the board seats, a result
which is clearly contrary to the contractual intent of the parties. The foreign Group (ASI) was limited to
designate three directors . This is the allowable participation of the ASI Group. Hence, in future
dealings, this limitation of six to three board seats should always be maintained as long as the joint
venture agreement exists considering that in limiting 3 board seats in the 9-man board of directors there
are provisions already agreed upon and embodied in the parties' Agreement to protect the interests
arising from the minority status of the foreign investors.
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Report on Election
PREMIUM MARBLE RESOURCES, INC.
vs.
THE COURT OF APPEALS and INTERNATIONAL CORPORATE BANK
1996 Nov 4, G.R. No. 96551
FACTS:
Herein petitioner filed a case for damages against respondent for allowing clearance of checks by
unauthorized officers of the former, to the formers prejudice. However this case was opposed by some
members of the petitioner on the ground that the filing of the complaint was not authorized by the
Board. Hence, a resolution of this case was necessary to litigate the claim of the petitioner for damages
against the respondent bank.
ISSUE:
Whether or not the filing was authorized by a duly constituted Board of Directors of the petitioner
corporation.
RULING:
NO.
The petitioners asserted that the Board authorized such filing. However, from the records of the
case as well as that of the corporation, no evidence was seen and shown that the results of the election
where the supposed members of the Board who allegedly authorized the filing were filed with the
Securities and Exchange Commission. The Corporation Code mandates that within thirty (30) days after
the election of the directors, trustees and officers of the corporation, the secretary, or any other officer of
the corporation, shall submit to the Securities and Exchange Commission, the names, nationalities and
residences of the directors, trustees and officers elected. Failure to comply with such requirement, the
elected members cannot be considered as the duly constituted and elected members of the Board.
Hence, being not duly constituted, the filing of the case was not authorized by the Board.
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Term of Office/Holdover
DR. HANS CHRISTIAN M. SEERES
vs.
COMMISSION ON ELECTIONS and MELQUIADES A. ROBLES
G.R. No. 178678, April 16, 2009
FACTS:
Private respondent Robles was elected president and chairperson of Buhay, a party-list group
duly registered with COMELEC. The constitution of BUHAY provides for a three-year term for all its
party officers, without re-election. Robles again signed and filed a Certificate of Nomination of BUHAYs
nominees for the 2007 elections, however such certificate was denied by petitioner alleging that he was
the acting president and secretary-general of BUHAY, having assumed that position since August 17,
2004 when Robles vacated the position. Seeres further claimed that the nominations made by Robles
were, for lack of authority, null and void owing to the expiration of the latters term as party president.
On May 10, 2007, the National Council of BUHAY adopted a resolution expelling Seeres as party
member for his act of submitting a Certificate of Nomination for the party. Subsequently, Robles was
adjudged as the duly authorized representative of Buhay. Aggrieved, petitioner filed this complaint.
ISSUE:
Whether or not respondent Robles is the duly authorized representative of BUHAY.
RULING:
YES.
Petitioner Seeres maintains that at the time the Certificate of Nomination was submitted, Robles
term as President of BUHAY had already expired, thus effectively nullifying the Certificate of Nomination
and the nomination process.
The Court was mot amenable. As a general rule, officers and directors of a corporation hold over
after the expiration of their terms until such time as their successors are elected or appointed. Sec. 23
of the Corporation Code contains a provision to this effect, thus: the board of directors or trustees to be
elected from among the holders of stocks, or where there is no stock, from among the members of the
corporation, who shall hold office for one (1) year until their successors are elected and qualified.
The holdover doctrine accords validity to what would otherwise be deemed as dubious corporate
acts and gives continuity to a corporate enterprise in its relation to outsiders. The voting members of
BUHAY duly elected Robles as party President in October 1999. And although his regular term as such
President expired in October 2002, no election was held to replace him and the other original set of
officers. Further, the constitution and by-laws of BUHAY do not expressly or impliedly prohibit a holdover situation. As such, since no successor was ever elected or qualified, Robles remained the President
of BUHAY in a "hold-over" capacity.
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How Removed
LEON J. LAMBERT
vs.
T. J. FOX
1914 Jan 29, G.R. No. 7991
FACTS:
Due to financial crisis the petitioner and the defendant were able to acquire the bulk of the stocks
of John R. Edgar & Co. as the latters creditors. Hence, upon incorporating said company, the parties
entered into an agreement that either of them will not sell or transfer their respective shares till after
one year from the date of agreement. However, less than a year, defendant Fox sold his stock in the said
corporation to E. D. McCullough of the firm of E. C. McCullough & Co. of Manila, a strong competitor of
the said John R. Edgar & Co., Inc. This sale was made by the defendant against the protest of the
plaintiff and with the warning that he would be held liable under the contract hereinabove set forth and
in accordance with its terms. In fact, the defendant Fox offered to sell his shares of stock to the plaintiff
for the same sum that McCullough was paying for them less P1, 000, the penalty specified in the
contract.
The trial Court rendered judgment in favor of defendant.
ISSUE:
Whether or not the stipulation not to sell is valid.
RULING:
YES.
The suspension of the power to sell has a beneficial purpose, results in the protection of the
corporation as well as of the individual parties to the contract, and is reasonable as to the length of time
of the suspension.
The intention of parties to a contract must be determined, in the first instance, from the words of
the contract itself. It is to be presumed that persons mean what they say when they speak plain English.
Interpretation and construction should by the instruments last resorted to by a court in determining
what the parties agreed to. Where the language used by the parties is plain, then construction and
interpretation are unnecessary and, if used, result in making a contract for the parties.
In this jurisdiction, there is no difference between a penalty and liquidated damages, so far as
legal results are concerned. Whatever differences exists between them as a matter of language, they are
treated the same legally. In either case the party to whom payment is to be made is entitled to recover
the sum stipulated without the necessity of proving damages. Indeed one of the primary purposes in
fixing a penalty or in liquidating damages is to avoid such necessity.
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How Compensated
GABRIEL C. SINGSON, et al.
vs.
COMMISSION ON AUDIT
G.R. No. 159355, August 9, 2010
FACTS:
Petitioners are the members of the Board of Philippine International Convention Center, Inc.
(PICCI). By virtue of the PICCI By-Laws, petitioners were authorized to receive P1,000.00 per diem each
for every meeting attended. An amended resolution further granted the Members of the additional
monthly RATA, in the amount of P1,500.00, to each of the petitioners. However, payment for such grants
were denied. The disallowance was questioned but it was upheld by herein respondent. Hence this
petition.
ISSUE:
Whether or not the grant of the compensation as well as the monthly RATA are valid.
RULING:
NO.
Section 30 of the Corporation Code, which authorizes the stockholders to grant compensation to
its directors, states: In the absence of any provision in the by-laws fixing their compensation, the
directors shall not receive any compensation, as such directors, except for reasonable per diems;
Provided, however, that any such compensation (other than per diems) may be granted to directors by
the vote of the stockholders representing at least a majority of the outstanding capital stock at a regular
or special stockholders meeting. In no case shall the total yearly compensation of directors, as such
directors, exceed ten (10%) percent of the net income before income tax of the corporation during the
preceding year.
From this, it is clear that the directors of a corporation shall not receive any compensation for
being members of the board of directors, except for reasonable per diems. The two instances where the
directors are to be entitled to compensation shall be when it is fixed by the corporations by-laws or
when the stockholders, representing at least a majority of the outstanding capital stock, vote to grant
the same at a regular or special stockholders meeting, subject to the qualification that, in any of the two
situations, the total yearly compensation of directors, as such directors, shall in no case exceed ten
(10%) percent of the net income before income tax of the corporation during the preceding year.
In this regard, the Court upholds the findings of respondent that petitioners right to
compensation as members of the PICCI Board of Directors is limited only to per diem of P1,000.00 for
every meeting attended, by virtue of the PICCI By-Laws.
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BA SAVINGS BANK
vs.
ROGER T. SIA, TACIANA U. SIA and JOHN DOE
G.R. No. 131214, July 27, 2000
FACTS:
A petition for certiorari was filed by herein petitioner bank. However, the CA denied due course
the same on the ground that the certificate of non-forum shopping was signed by a lawyer. A Motion for
Reconsideration was subsequently filed by the petitioner, attached to which was a BA Savings Bank
Corporate Secretarys Certificate. The Certificate showed that the petitioners Board of Directors
approved a Resolution on May 21, 1996, authorizing the petitioners lawyers to represent it in any action
or proceeding before any court, tribunal or agency; and to sign, execute and deliver the Certificate of
Non-forum Shopping, among others. Said motion was denied on the ground that Supreme Court Revised
Circular No. 28-91 requires that it is the petitioner, not the counsel, who must certify under oath to all
of the facts and undertakings required therein.
ISSUE:
Whether or not the CA was correct.
RULING:
YES.
A corporation exercises powers through its board of directors and/or its duly authorized officers
and agents. Physical acts, like the signing of documents, can be performed only by natural persons duly
authorized for the purpose by corporate bylaws or by a specific act of the board of directors. In this case,
the corporations board of directors issued a Resolution specifically authorizing its lawyers to act as
their agents in any action or proceeding before the Supreme Court, the Court of Appeals, or any other
tribunal or agency and to sign, execute and deliver in connection therewith the necessary pleadings,
motions, verification, affidavit of merit, certificate of non-forum shopping and other instruments
necessary for such action and proceeding. The Resolution was sufficient to vest such persons with the
authority to bind the corporation and was specific enough as to the acts they were empowered to do.
Circular 28-91 requires the parties themselves to sign the certificate of non-forum shopping.
However, such requirement cannot be imposed on artificial persons, like corporations, for the simple
reason that they cannot personally do the task themselves. In this case, the corporation very well
exercised its power to authorize a representative to act on its behalf.
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LESLIE OKOL
vs.
SLIMMERS WORLD INTERNATIONAL, BEHAVIOR MODIFICATIONS, INC., and RONALD JOSEPH
MOY
G.R. No. 160146, December 11, 2009
FACTS:
Leslie Okol, a Vice President of Slimmers World, was terminated from employment after an
incident with the Bureau of Customs regarding equipment belonging to/consigned to Slimmers World.
As such, Okolfiled a complaint with the Arbitration branch of the NLRC against Slimmers World for
illegal suspension, illegal dismissal, unpaid commissions, damages, and attorneys fees, with prayer for
reinstatement and payment of backwages.
Slimmers World filed a Motion to Dismiss the case, asserting that the NLRC had no jurisdiction
over the subject matter of the complaint. Slimmers Worlds motion was sustained, with the labor arbiter
ruling that since Okol was the vice president at the time of her dismissal, being a corporate officer, the
dispute was an intra-corporate controversy falling outside the jurisdiction of the arbitration branch. On
appeal, the NLRC reversed the LA decision and ordered Slimmers World to reinstate Okol. The CA
subsequently set aside the NLRC decision and ruled that the case was an intra-corporate controversy,
and falls within the jurisdiction of the regular courts pursuant to RA 8799.
ISSUE:
Whether Okol was a corporate officer of Slimmers World.
RULING:
YES.
Okol was a corporate officer at the time of her dismissal. According to the Amended By-Laws
of Slimmers World which enumerate the power of the board of directors as well as the officers of the
corporation, the general management of the corporation shall be vested in a board of five directors who
shall be stockholders and who shall be elected annually by the stockholders and who shall serve until
the election and qualification of their successors and like the Chairman of the Board and the President,
the Vice President shall be elected by the Board of Directors from its own members. The Vice President
shall be vested with all the powers and authority and is required to perform all the duties of the
President during the absence of the latter for any cause. The Vice President will perform such duties as
the Board of Directors may impose upon him from time to time. This clearly shows that Okol was a
director and officer of Slimmers World.
An office is created by the charter of the corporation and the officer is elected by the directors and
stockholders. On the other hand, an employee usually occupies no office and generally is employed not
by action of the directors or stockholders but by the managing officer of the corporation who also
determines the compensation to be paid to such employee.
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GLORIA V. GOMEZ
vs.
PNOC DEVELOPMENT AND MANAGEMENT CORPORATION (PDMC) - (formerly known as FILOIL
DEVELOPMENT AND MANAGEMENT CORPORATION [FDMC])
G.R. No. 174044, November 27, 2009
FACTS:
Petitioner Gloria V. Gomez used to work as Manager of the Legal Department of Petron
Corporation, then a government-owned corporation. With Petrons privatization, she availed of the
companys early retirement program and left that organization on April 30, 1994. On the following day,
May 1, 1994, however, Filoil Refinery Corporation (Filoil), also a government-owned corporation,
appointed her its corporate secretary and legal counsel, with the same managerial rank, compensation,
and benefits that she used to enjoy at Petron. However, the privatization did not materialize so Gomez
continued to serve as corporate secretary of respondent PDMC.
On March 29, 1999 the new board of directors of respondent PDMC removed petitioner Gomez as
corporate secretary. Further, at the boards meeting on October 21, 1999 the board questioned her
continued employment as administrator. In answer, she presented the former presidents May 24, 1998
letter that extended her term. Dissatisfied with this, the board sought the advice of its legal
department, which expressed the view that Gomezs term extension was an ultra vires act of the former
president. It reasoned that, since her position was functionally that of a vice-president or general
manager, her term could be extended under the companys by-laws only with the approval of the board.
The legal department held that her de facto tenure could be legally put to an end. Petitioner Gomez for
her part conceded that as corporate secretary, she served only as a corporate officer. But, when they
named her administrator, she became a regular managerial employee. Consequently, the respondent
PDMCs board did not have to approve either her appointment as such or the extension of her term in
1998.
ISSUE:
NLRC.
Whether or not Gomez is an ordinary employee whose complaint is within the jurisdiction of the
RULING:
YES.
The relationship of a person to a corporation, whether as officer or agent or employee, is not
determined by the nature of the services he performs but by the incidents of his relationship with the
corporation as they actually exist. That the employee served concurrently as corporate secretary for a
time is immaterial. A corporation is not prohibited from hiring a corporate officer to perform services
under circumstances which will make him an employee. Indeed, it is possible for one to have a dual role
of officer and employee. NLRC has jurisdiction over a complaint filed by one who served both as
corporate officer and employee, when the money claims were made as an employee and not as a
corporate officer.
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EMILIANO ACUA
vs.
BATAC PRODUCERS
GR L-20333, 30 June 1963
FACTS:
Acua entered into a contract with Batac wherein he agreed to advance P20,000.00 to the
company for its tobacco planting and drying, provided that he shall be assigned as the companys
representative in Manila and supervise the transport and delivery of the goods in the said place. Batacs
Board of Directors are amenable with the idea and thereafter issued a resolution authorizing Manager
Leon Verano to enter into the agreement on behalf of the corporation.
The necessary contract between Acua and Verano was entered into, with some of the Board of
Directors acting as witness. Acua then inquired if the contract needs to be ratified by the Board, in
which the counsel for Batac answered in the negative. Acua thereafter proceeded to perform his part of
the contrac, including the advancement of the amount promised, which was accepted by Batac.
Batacs BoD, however, disapproved the contract. Acua insisted on its performance, but the
corporation refused, stating that the contract is not binding by reason that it was not ratified by the
board.
ISSUE:
Whether or not the contract between Acua and Verano is binding with the corporation.
RULING:
YES.
A perusal of the complaint reveals that it contains sufficient allegations indicating such approval
or at least subsequent ratification. On the first point note the following averments: that on May 9th the
plaintiff met with each and all of the individual defendants (who constituted the entire Board of
Directors) and discussed with them extensively the tentative agreement and he was made to understand
that it was acceptable to them, except as to plaintiff's remuneration; that it was finally agreed between
plaintiff and all said Directors that his remuneration would be P0.30 per kilo (of tobacco); and that after
the agreement was formally executed he was assured by said Directors that there would be no need of
formal approval by the Board. It should be noted in this connection that although the contract required
such approval it did not specify just in what manner the same should be given.
On the question of ratification the complaint alleges that plaintiff delivered to the defendant
corporation the sum of P20,000.00 as called for in the contract; that he rendered the services he was
required to do; that he furnished said defendant 3,000 sacks at a cost of P6,000.00 and advanced to it
the further sum of P5,000.00; and that he did all of these things with the full knowledge, acquiescence
and consent of each and all of the individual defendants who constitute the Board of Directors of the
defendant corporation. There is abundant authority in support of the proposition that ratification may
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ERNESTINA CRISOLOGO-JOSE
vs.
COURT OF APPEALS, RICARDO SANTOS, JR.
GR 80599, 15 September, 1989
FACTS:
In 1980, Ricardo S. Santos, Jr. was the vice-president of Mover Enterprises, Inc. in-charge of
marketing and sales; and the president of the said corporation was Atty. Oscar Z. Benares. On April 30,
1980, Atty. Benares, in accommodation of his clients, the spouses Jaime and Clarita Ong, a check
drawn against Traders Royal Bank, dated June 14, 1980, in the amount of P45,000.00 payable to
Ernestina Crisologo-Jose. Since the check was under the account of Mover Enterprises, Inc., the same
was to be signed by its president, Atty. Oscar Z. Benares, and the treasurer of the said corporation.
However, since at that time, the treasurer of Mover Enterprises was not available, Atty. Benares prevailed
upon Santos, Jr., to sign the aforesaid check as an alternate signatory, who did sign the same.
It appears that the check to Crisologo-Jose in consideration of the waiver or quitclaim by said
defendant over a certain property which the Government Service Insurance System (GSIS) agreed to sell
to the clients of Atty. Oscar Benares, the spouses Jaime and Clarita Ong, with the understanding that
upon approval by the GSIS of the compromise agreement with the spouses Ong, the check will be
encashed accordingly. However, since the compromise agreement was not approved within the expected
period of time, the aforesaid check was replaced by Atty. Benares with another Traders Royal Bank
check dated August 10, 1980, in the same amount. This replacement check was also signed by Atty.
Benares and by Santos, Jr. When Jose deposited this replacement check with her account, it was
dishonored for insufficiency of funds. A subsequent redepositing of the said check was likewise
dishonored by the bank for the same reason.
ISSUE:
Whether or not Movers Enterprises should be held liable to the bounced checks which are
personal liabilities of Atty. Baares.
RULING:
NO.
The provision of the Negotiable Instruments Law which holds an accommodation party liable on
the instrument to a holder for value, although such holder at the time of taking the instrument knew
him to be only an accommodation party, does not include nor apply to corporations which are
accommodation parties. This is because the issue or indorsement of negotiable paper by a corporation
without consideration and for the accommodation of another is ultra vires. Hence, one who has taken
the instrument with knowledge of the accommodation nature thereof cannot recover against a
corporation where it is only an accommodation party.
By way of exception, an officer or agent of a corporation shall have the power to execute or indorse
a negotiable paper in the name of the corporation for the accommodation of a third person only if
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RICARDO LLAMADO
vs.
COURT OF APPEALS, PEOPLE OF THE PHILIPPINES
GR 99032, 26 March 1997
FACTS:
Private complainant, Leon Gaw, delivered to accused the amount of P180,000.00, with the
assurance of Aida Tan, the secretary of the accused in the corporation, that it will be repaid on 4
November 1983. Upon delivery of the money, accused Ricardo Llamado took it and placed it inside a
deposit box. Accused Jacinto Pascual and Ricardo Llamado signed Philippine Trust Company Check No.
047809, postdated 4 November 1983, in the amount of P186,500.00 in the presence of private
complainant.
The aforesaid check was issued in payment of the cash money delivered to the accused by private
complainant, plus interests thereon for sixty (60) days in the amount of P6,500.00.
On 4 November 1983, private complainant deposited the check in his current account with the
Equitable Banking Corporation which later informed the complainant that said check was dishonored by
the drawee bank because payment was stopped, and that the check was drawn against insufficient
funds. Private complainant was also notified by the Equitable Banking Corporation that his current
account was debited for the amount of P186,500.00 because of the dishonor of the said check.
Private complainant returned to Aida Tan to inform her of the dishonor of the check. Aida Tan
received the check from private complainant with the assurance that she will have said check changed
with cash. However, upon his return to Aida Tan, the latter informed him that she had nothing to do
with the check.
Llamado alleges that he should not be held personally liable for the amount of the check because
it was a check of the Pan Asia Finance Corporation and he signed the same in his capacity as Treasurer
of the corporation.
ISSUE:
Whether or not Llamado should be held liable under BP 22.
RULING:
YES.
He is mere act of signing the check held him liable under BP 22. Where the check is drawn by a
corporation, company or entity, the person or persons who actually signed the check in behalf of such
drawer shall be liable under this Act.
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SERGIO NAGUIAT
vs.
CLARK FIELD TAXI, INC.
GR 116123, 13 March 1997
FACTS:
Petitioner CFTI held a concessionaire's contract with the Army Air Force Exchange Services
("AAFES") for the operation of taxi services within Clark Air Base. Sergio F. Naguiat was CFTI's
president, while Antolin T. Naguiat was its vice-president. Like Sergio F. Naguiat Enterprises,
Incorporated ("Naguiat Enterprises"), a trading firm, it was a family-owned corporation.
Individual respondents were previously employed by CFTI as taxicab drivers. Due to the phaseout of the US military bases in the Philippines, from which Clark Air Base was not spared, the AAFES
was dissolved, and the services of individual respondents were officially terminated on November 26,
1991.
The AAFES Taxi Drivers Association ("drivers' union"), through its local president, Eduardo
Castillo, and CFTI held negotiations as regards separation benefits that should be awarded in favor of
the drivers. They arrived at an agreement that the separated drivers will be given P500.00 for every year
of service as severance pay. Most of the drivers accepted said amount in December 1991 and January
1992. However, individual respondents herein refused to accept theirs.
Instead, after disaffiliating themselves from the drivers' union and filed a complaint against
"Sergio F. Naguiat doing business under the name and style Sergio F. Naguiat Enterprises, Inc., and
CFTI with Antolin T. Naguiat as vice president and general manager, as party respondent.
ISSUE:
Whether or not Sergio Naguiat may be held liable for the claims instituted by the taxi drivers
against his company.
RULING:
YES.
As provided for under the fifth paragraph of Section 100 of the Corporation Code specifically
imposes personal liability upon the stockholder actively managing or operating the business and affairs
of the close corporation.
In fact, in posting the surety bond required by this Court for the issuance of a temporary
restraining order enjoining the execution of the assailed NLRC Resolutions, only Sergio F. Naguiat, in his
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YES.
They acted in bad faith in dismissing the respondents. As a general rule established by legal
fiction, the corporation has a personality separate and distinct from its officers, stockholders and
members. Hence, officers of a corporation are not personally liable for their official acts unless it is
shown that they have exceeded their authority. This fictional veil, however, can be pierced by the very
same law which created it when "the notion of the legal entity is used as a means to perpetrate fraud, an
illegal act, as a vehicle for the evasion of an existing obligation, and to confuse legitimate issues". Under
the Labor Code, for instance, when a corporation violates a provision declared to be penal in nature, the
penalty shall be imposed upon the guilty officer or officers of the corporation.
In the case at bar, the thrust of petitioners' arguments was aimed at confining liability solely to
the corporation, as if the entity were an automaton designed to perform functions at the push of a
button. The issue, however, is not limited to payment of separation pay under Article 283 but also
payment of labor standard benefits such as underpayment of wages, holiday pay and 13th month pay to
two of the private respondents. While there is no sufficient evidence to conclude that petitioners have
indiscriminately stopped the entity's business, at the same time, petitioners have opted to abstain from
presenting sufficient evidence to establish the serious and adverse financial condition of the company.
BENJAMIN SANTOS
vs.
NLRC, MELVIN MILLENA
GR 101699, 13 March 1996
FACTS:
Melvin Millena, on 01 October 1985, was hired to be the project accountant for Mana Mining and
Development Corp.s mining operations in Gatbo, Bacon, Sorsogon. On 12 August 1986, private
respondent sent to Mr. Gil Abao, the MMDC corporate treasurer, a memorandum calling the latter's
attention to the failure of the company to comply with the withholding tax requirements of, and to make
the corresponding monthly remittances to, the Bureau of Internal Revenue ("BIR") on account of delayed
payments of accrued salaries to the company's laborers and employees.
Albao responded that the mining operations in Sorsogon shall be stopped pending the end of the
wet season and the normalization of the peace and order situation in the province. Therefore, MMDC is
dispensing the services of Millena because of lack of work load.
Private respondent expressed "shock" over the termination of his employment. He complained
that he would not have resigned from the Sycip, Gorres & Velayo accounting firm, where he was already
a senior staff auditor, had it not been for the assurance of a "continuous job" by MMDC's Engr.
Rodillano E. Velasquez. Private respondent requested that he be reimbursed the "advances" he had
made for the company and be paid his "accrued salaries/claims
With his demands left unheeded, Millena filed a complaint for illegal dismissal, unpaid salaries,
13th month pay, overtime pay, separation pay and incentive leave pay against MMDC and its two top
officials, namely, herein petitioner Benjamin A. Santos (the President) and Rodillano A. Velasquez (the
executive vice-president).
ISSUE:
Whether or not the impleaded officials of MMDC may be held liable.
RULING:
NO.
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It was not proven that they acted in bad faith. A corporation is a juridical entity with legal
personality separate and distinct from those acting for and in its behalf and, in general, from the people
comprising it. Nevertheless, being a mere fiction of law, peculiar situations or valid grounds can exist to
warrant, albeit done sparingly, the disregard of its independent being and the lifting of the corporate
veil. The Court also has collated the settled instances when, without necessarily piercing the veil of
corporate fiction, personal civil liability can also be said to lawfully attach to a corporate director, trustee
or officer.
The case of petitioner is way off these exceptional instances. It is not even shown that petitioner
has had a direct hand in the dismissal of private respondent enough to attribute to him (petitioner) a
patently unlawful act while acting for the corporation. It is undisputed that the termination of
petitioner's employment has, instead, been due, collectively, to the need for a further mitigation of losses,
the onset of the rainy season, the insurgency problem in Sorsogon and the lack of funds to further
support the mining operation in Gatbo.
JOSE SIA
vs.
PEOPLE OF THE PHILIPPINES
GR L-30896, 28 April 1983
FACTS:
Jose O. Sia sometime prior to 24 May, 1963, was General Manager of the Metal Manufacturing
Company of the Philippines, Inc. engaged in the manufacture of steel office equipment; on 31 May, 1963,
because his company was in need of raw materials to be imported from abroad, he applied for a letter of
credit to import steel sheets from Mitsui Bussan Kaisha, Ltd. of Tokyo, Japan, the application being
directed to the Continental Bank, herein complainant, and his application having been approved, the
letter of credit was opened on 5 June, 1963 in the amount of $18,300. The goods arrived sometime in
July, 1963 according to accused himself, now from here on there is some debate on the evidence;
according to Complainant Bank, there was permitted delivery of the steel sheets only upon execution of
a trust receipt, while according to the accused, the goods were delivered to him sometime before he
executed that trust receipt in fact they had already been converted into steel office equipment by the
time he signed said trust receipt. But there is no question - and this is not debated that the bill of
exchange issued for the purpose of collecting the unpaid account thereon having fallen due neither
accused nor his company having made payment thereon notwithstanding demands, and the accounts
having reached the sum in pesos of P46,818.68 after deducting his deposit valued at P28,736.47.
ISSUE:
Whether or not Sia should be held liable.
RULING:
NO.
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Self-Dealing Director/Officer
REPUBLIC OF THE PHILIPPINES
vs.
EDUARDO CONJUANGCO
GR 166859, 12 April 2011
FACTS:
Danding Cojuangco is being accused of using public funds to finance his acquisition of shares in
the San Miguel Corporation. Through the coconut levy fund, was is being accused of buying out
shareholders in the corporation in order to become a substantial shareholder himself. To carry out his
scheme, he used dummy shareholders who shall be trustors of the shares on his behalf.
Contention rises on his culpability as a public official during the time that he bought the shares.
It is claimed by the Sandiganbayan that he was able to amass vast shares of the corporation through
the use of the coconut levy fund, which is public in nature. Therefore, it but apparent that he be held
liable for his actions in taking control of the corporation.
ISSUE:
Whether or not Conjuangco illegally used ill-gotten wealth to buy shares of SMC.
RULING:
NO.
The funds are in fact loaned from UCPB, which was organized as a depositary of the coconut levy
funds of the corporation. Also, the Government failed to adduce substantial evidence linking Cojuangco
to the use of Marcos ill-gotten wealth.
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CHARLES W. MEAD
vs.
E.C. MCCULLOUGH, et. al.
GR 6217, 26 December 2011
FACTS:
On March 15, 1902, the plaintiff (Mead will be referred to as the plaintiff in this opinion unless it
is otherwise stated) and the defendant organized the "Philippine Engineering and Construction
Company.
Shortly after the organization, the directors held a meeting and elected the plaintiff as general
manager. The plaintiff held this position with the company for nine months, when he resigned to accept
the position of engineer of the Canton and Shanghai Railway Company.
The contract and work undertaken by the company during the management of Mead were the
wrecking contract with the Navy Department at Cavite for the raising of the Spanish ships sunk by
Admiral Dewey; the contract for the construction of certain warehouses for the quartermaster
department; the construction of a wharf at Fort McKinley for the Government; The supervision of the
construction of the Pacific Oriental Trading Company's warehouse; and some other odd jobs not
specifically set out in the record.
Shortly after the plaintiff left the Philippine Islands for China, the other directors, the defendants
in this case, held a meeting on December 24, 1903, for the purpose of discussing the condition of the
company at that time and determining what course to pursue.
The assignees of the wrecking contract, including McCullough, formed was not known as the
"Manila Salvage Association." This association paid to McCullough $15,000 Mexican Currency cash for
the assignment of said contract. In addition to this payment, McCullough retained a one-sixth interest
in the new company or association.
ISSUE:
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Disloyalty
JOHN GOKONGWEI
vs.
SEC, ANDRES SORIANO, et al.
GR L-45911, 11 April 1979
FACTS:
Gokonwei alleged that on September 18, 1976, individual respondents amended by bylaws of San
Miguel Corporation, basing their authority to do so on a resolution of the stockholders adopted on
March 13, 1961, when the outstanding capital stock of respondent corporation was only
P70,139.740.00, divided into 5,513,974 common shares at P10.00 per share and 150,000 preferred
shares at P100.00 per share. At the time of the amendment, the outstanding and paid up shares totalled
30,127,043, with a total par value of P301,270,430.00. It was contended that according to section 22 of
the Corporation Law and Article VIII of the by-laws of the corporation, the power to amend, modify,
repeal or adopt new by-laws may be delegated to the Board of Directors only by the affirmative vote of
stockholders representing not less than 2/3 of the subscribed and paid up capital stock of the
corporation, which 2/3 should have been computed on the basis of the capitalization at the time of the
amendment. Since the amendment was based on the 1961 authorization, petitioner contended that the
Board acted without authority and in usurpation of the power of the stockholders.
It was claimed that prior to the questioned amendment, petitioner had all the qualifications to be
a director of respondent corporation, being a substantial stockholder thereof; that as a stockholder,
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Watered Stocks
LIRAG TEXTILE MILLS and BASILIO LIRAG
vs.
SSS, HON. PACIFICO DE CASTRO
GR L-33205, 31 August 1987
FACTS:
That on September 4, 1961, the SSS and Lirag Textile Mills, Inc. and Basilio Lirag entered into a
Purchase Agreement under which the plaintiff agreed to purchase from the said defendant preferred
shares of P1,000,000.00 subject to the conditions set forth in such agreement. Pursuant to the
Purchase Agreement of September 4, 1961, SSS, on January 31, 1962, paid Lirag Textile Mills, Inc. the
sum of P500,000.00 for which the said defendant issued to plaintiff 5,000 preferred shares with a par
value of P100.00 per share.
To guarantee the redemption of the stocks purchased by the plaintiff, the payment of dividends,
as well as the other obligations of the Lirag Textile Mills, Basilio signed the Purchase Agreement of
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RICARDO NAVA
vs.
PEERS MARKETING CORP., RENATO CUSI and AMPARO CUSI
GR L-28120, 25 November 1976
FACTS:
Teofilo Po as an incorporator subscribed to eighty shares of Peers Marketing Corporation at one
hundred pesos a share or a total par value of eight thousand pesos. Po paid two thousand pesos or
twenty-five percent of the amount of his subscription. No certificate of stock was issued to him or, for
that matter, to any incorporator, subscriber or stockholder.
On April 2, 1966 Po sold to Ricardo A. Nava for two thousand pesos twenty of his eighty shares.
In the deed of sale Po represented that he was "the absolute and registered owner of twenty shares" of
Peers Marketing Corporation.
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FACTS:
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ELTON CHASE
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CATALINA R. REYES
vs.
HON. BIENVENIDO A. TAN, as Judge of the Court of First Instance of Manila, Branch XIII and
FRANCISCA R. JUSTINIANI
G.R. No. L-16982. September 30, 1961
FACTS:
The corporation, Roxas-Kalaw Textile Mills, Inc., was organized on June 5, 1954 by defendants
Cesar K. Roxas, Adelia K. Roxas, Benjamin M. Roxas, Jose Ma. Barcelona and Morris Wilson, for and on
behalf of the following primary principals with the following shareholdings: Adelia K. Roxas, 1200 Class
A shares; I. Sherman, 900 Class A shares; Robert W. Born, 450 Class A shares and Morris Wilson, 450
Class A shares; that the respondent holds both Class A and Class B shares and number and value
thereof are is follows: Class A 50 shares, Class B 1,250 shares.
On May 8, 1957, the Board of Directors approved a resolution designating one Dayaram as comanager and Morris Wilson was likewise designated as co-manager with responsibilities for the
management of the factory only. An office in New York was opened for the purpose of supervising
purchases, which purchases must have the unanimous agreement of Cesar K. Roxas, New York resident
member of the board of directors, Robert Born and Wadhumal Dalamal or their respective
representatives. Several purchases aggregating $289,678.86 were made in New York for raw materials
and shipped to the Philippines, which shipment were found out to consist not of raw materials but
already finished products, for which reasons the Central Bank of the Philippines stopped all dollar
allocations for raw materials for the corporation which necessarily led to the paralyzation of the
operation of the textile mill and its business.
ISSUES:
Whether or not a derivative suit will prosper.
RULING:
NO.
The claim that respondent Justiniani did not take steps to remedy the illegal importation for a
period of two years is without merit. During that period of time respondent had the right to assume and
expect that the directors would remedy the anomalous situation of the corporation brought about by
their own wrong doing. Only after such period of time had elapsed could respondent conclude that the
directors were remiss in their duty to protect the corporation property and business. The fraud consisted
in importing finished textile instead of raw cotton for the textile mill; the fraud, therefore, was committed
by the manager of the business and was consented to by the directors, evidently beyond reach of
respondent as treasurer for that period.
The directors permitted the fraudulent transaction to go unpunished and nothing appears to have
been done to remove the erring purchasing managers. In a way the appointment of a receiver may have
been thought of by the court below so that the dollar allocation for raw material may be revived and the
textile mill placed on an operating basis.
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CANDIDO PASCUAL
vs.
EUGENIO DEL SAZ OROZCO, ET AL.
G.R. No. L-5174. March 17, 1911
FACTS:
This action was brought by the plaintiff Pascual, in his own right as a stockholder of the bank, for
the benefit of the bank, and all the other stockholders thereof. The Banco Espaol-Filipino is a banking
corporation, constituted as such by royal decree of the Crown of Spain in the year 1854, the original
grant having been subsequently extended and modified by royal decree of July 14, 1897, and by Act No.
1790 of the Philippine Commission.
It is alleged in the amended complaint that the only compensation contemplated or provided for
the managing officers of the bank was a certain per cent of the net profits resulting from the bank's
operations, as set forth in article 30 of its reformed charter or statutes.
The gist of the first and second causes of action is as follows: The defendants constitute a
majority of the present board of directors of the bank, who alone can authorize an action against them
in the name of the corporation. It appears that during the years 1903, 1904, 1905, and 1907 the
defendants and appellees, without the knowledge, consent, or acquiescence of the stockholders,
deducted their respective compensation from the gross income instead of from the net profits of the
bank, thereby defrauding the bank and its stockholders of approximately P20,000 per annum.
The second cause of action sets forth that defendants' and appellees' immediate predecessors in office in
the bank during the years 1899, 1900, 1901, and 1902, committed the same illegality as to their
compensation as is charged against the defendants themselves. In the four years immediately following
the year 1902, the defendants and appellees were the only officials or representatives of the bank who
could and should investigate and take action in regard to the sums of money thus fraudulently
appropriated by their predecessors. They were the only persons interested in the bank who knew of the
fraudulent appropriation by their predecessors.
The court below sustained the demurrer as to the first and second causes of action on the ground that
in actions of this character the plaintiff must aver in his complaint that he was the owner of stock in the
corporation at the time of the occurrences complained of, or else that the stock has since devolved upon
him by operation of law.
ISSUE:
Whether or not the petitioner has a cause of action to file a derivative suit.
RULING:
YES.
As to the first cause of action: In suits of this character the corporation itself and not the plaintiff
stockholder is the real party in interest. The rights of the individual stockholder are merged into that of
the corporation. It is a universally recognized doctrine that a stockholder in a corporation has no title
legal or equitable to the corporate property; that both of these are in the corporation itself for the benefit
of all the stockholders. So it is clear that the plaintiff, by reason of the fact that he is a stockholder in
the bank (corporation) has a right to maintain a suit for and on behalf of the bank, but the extent of
such a right must depend upon when, how, and for what purpose he acquired the shares which he now
owns.
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POWERS OF CORPORATION
Theory of Special Capacities v. Theory of General Capacities
ACEBEDO OPTICAL COMPANY, INC.
vs.
THE HONORABLE COURT OF APPEALS, Hon. MAMINDIARA MANGOTARA, in his capacity as
Presiding Judge of the RTC, 12th Judicial Region, Br. 1, Iligan City; SAMAHANG OPTOMETRIST
Sa PILIPINAS Iligan City Chapter, LEO T. CAHANAP, City Legal Officer, and Hon. CAMILO P.
CABILI, City Mayor of Iligan
G.R. No. 100152. March 31, 2000
FACTS:
Petitioner applied with the Office of the City Mayor of Iligan for a business permit. After
consideration of petitioner's application and the opposition interposed thereto by local optometrists,
respondent City Mayor issued Business Permit No. 5342 subject to the following conditions that since it
is a corporation, Acebedo cannot put up an optical clinic but only a commercial store; it cannot examine
and/or prescribe reading and similar optical glasses for patients, because these are functions of optical
clinics; it cannot sell reading and similar eyeglasses without a prescription having first been made by an
independent optometrist (not its employee) or independent optical clinic and can only sell directly to the
public, without need of a prescription, Ray-Ban and similar eyeglasses; it cannot advertise optical lenses
and eyeglasses, but can advertise Ray-Ban and similar glasses and frames; and is allowed to grind
lenses but only upon the prescription of an independent optometrist.
Private respondent Samahan ng Optometrist Sa Pilipinas (SOPI), Iligan Chapter, through its
Acting President, Dr. Frances B. Apostol, lodged a complaint against the petitioner before the Office of
the City Mayor, alleging that Acebedo had violated the conditions set forth in its business permit and
requesting the cancellation and/or revocation of such permit.
ISSUES:
Whether or not the act of the Respondent Mayor was lawful.
RULING:
NO.
The authority of city mayors to issue or grant licenses and business permits is beyond cavil.
However, the power to grant or issue licenses or business permits must always be exercised in
accordance with law, with utmost observance of the rights of all concerned to due process and equal
protection of the law. In the case under consideration, the business permit granted by respondent City
Mayor to petitioner was burdened with several conditions.
Distinction must be made between the grant of a license or permit to do business and the
issuance of a license to engage in the practice of a particular profession. The first is usually granted by
the local authorities and the second is issued by the Board or Commission tasked to regulate the
particular profession. A business permit authorizes the person, natural or otherwise, to engage in
business or some form of commercial activity. A professional license, on the other hand, is the grant of
authority to a natural person to engage in the practice or exercise of his or her profession.
A business permit is issued primarily to regulate the conduct of business and the City Mayor
cannot, through the issuance of such permit, regulate the practice of a profession, like that of
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ISSUE:
Whether or not the purpose for which petitioner was organized and the transaction of its lawful
business reasonably and necessarily requires acquisition and holds the certificate and operates as a
common carrier by land.
RULING:
NO.
Under Section 13 (5) of the Corporation Law, a corporation created thereunder may purchase,
hold, etc., and otherwise deal in such real and personal property is the purpose for which the
corporation was formed may permit, and the transaction of its lawful business may reasonably and
necessarily require.
Petitioners corporate purposes are to carry on a general mercantile and commercial business,
etc., and that it is authorized in its articles of incorporation to operate and otherwise deal in and
concerning automobiles and automobile accessories' business in all its multifarious ramification and to
operate, etc., and otherwise dispose of vessels and boats, etc., and to own and operate steamship and
sailing ships and other floating craft and deal in the same and engage in the Philippine Islands and
elsewhere in the transportation of persons, merchandise and chattels by water; all this incidental to the
transportation of automobiles.
The Court finds that Petitoners articles of incorporation are precisely the best evidence that it
has no authority at all to engage in the business of land transportation and operate a taxicab service.
That it may operate and otherwise deal in automobiles and automobile accessories; that it may engage
in the transportation of persons by water does not mean that it may engage in the business of land
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act.
Whether or not the donation made by the corporation of the proceeds of the insurance is a valid
RULING:
YES.
The Articles of Incorporation of Dela Rama Steamship provided that under (g) the company may
invest and deal with moneys of the company not immediately required, in such a manner as from time to
time may be determined, and under (i) to lend money or to aid in any other manner any person
association, or corporation of which any obligation or in which any interest is held by the corporation or
in the affairs of prosperity of which the corporation has a lawful interest.
The corporation was thus given broad and almost unlimited powers to carry out the purposes for
which it was organized. The word deal is broad enough to include any manner of disposition, and thus
the donation comes within the scope of this broad power. The company was in fact very much solvent as
it was able to declare and issue dividends to its stockholders, and shows that the excess funds which
were not needed by the company which was donated to the children was justified under the AOI. Under
the second broad power, the corporation knew well its scope such that none lifted a finger to dispute its
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On October 22, 1976, petitioner, as stockholder of respondent San Miguel Corporation, filed with
the Securities and Exchange Commission (SEC) a petition for "declaration of nullity of amended by-laws,
cancellation of certificate of filing of amended by- laws, injunction and damages with prayer for a
preliminary injunction" against the majority of the members of the Board of Directors and San Miguel
Corporation as an unwilling petitioner.
Petitioner alleged that on September 18, 1976, individual respondents amended by bylaws of the
corporation, basing their authority to do so on a resolution of the stockholders adopted on March 13,
1961, when the outstanding capital stock of respondent corporation was only P70,139.740.00, divided
into 5,513,974 common shares at P10.00 per share and 150,000 preferred shares at P100.00 per share.
At the time of the amendment, the outstanding and paid up shares totalled 30,127,047 with a total par
value of P301,270,430.00. It was contended that according to section 22 of the Corporation Law and
Article VIII of the by-laws of the corporation, the power to amend, modify, repeal or adopt new by-laws
may be delegated to the Board of Directors only by the affirmative vote of stockholders representing not
less than 2/3 of the subscribed and paid up capital stock of the corporation, which 2/3 should have
been computed on the basis of the capitalization at the time of the amendment. Since the amendment
was based on the 1961 authorization, petitioner contended that the Board acted without authority and
in usurpation of the power of the stockholders.
ISSUES:
Whether or not respondent SEC committed grave abuse of discretion in allowing discussion of
Item 6 of the Agenda of the Annual Stockholders' Meeting on May 10, 1977, and the ratification of the
investment in a foreign corporation of the corporate funds, allegedly in violation of section 17-1/2 of the
Corporation Law.
RULING:
NO.
Section 17-1/2 of the Corporation Law allows a corporation to "invest its funds in any other
corporation or business or for any purpose other than the main purpose for which it was organized"
provided that its Board of Directors has been so authorized by the affirmative vote of stockholders
holding shares entitling them to exercise at least two-thirds of the voting power. If the investment is
made in pursuance of the corporate purpose, it does not need the approval of the stockholders. It is only
when the purchase of shares is done solely for investment and not to accomplish the purpose of its
incorporation that the vote of approval of the stockholders holding shares entitling them to exercise at
least two-thirds of the voting power is necessary.
As stated by Respondent Corporation, the purchase of beer manufacturing facilities by SMC was an
investment in the same business stated as its main purpose in its Articles of Incorporation, which is to
manufacture and market beer. It appears that the original investment was made in 1947-1948, when
SMC, then San Miguel Brewery, Inc., purchased a beer brewery in Hongkong (Hongkong Brewery &
Distillery, Ltd.) for the manufacture and marketing of San Miguel beer thereat. Restructuring of the
investment was made in 1970-1971 thru the organization of SMI in Bermuda as a tax free
reorganization.
RAMON DE LA RAMA et.al
vs.
MA-AO SUGAR CENTRAL CO., INC., J. AMADO ARANETA, MRS. RAMON S. ARANETA, ROMUALDO
M. ARANETA, and RAMON A. YULO
G.r.No. L-17504 & l-17506; February 28, 1969
FACTS:
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On May 7, 1984, respondent Nilcar Y. Fajilan offered in writing to resign as President and
Member of the Board of Directors of petitioner, Boman Environmental Development Corporation
(BEDECO), and to sell to the company all his shares, rights, and interests therein for P 300,000 plus the
transfer to him of the company's Isuzu pick-up truck which he had been using.
At a meeting of the Board of Directors of BEDECO, Fajilan's resignation as president was
accepted and new officers were elected. Fajilan's offer to sell his shares back to the corporation was
approved, the Board promising to pay for them on a staggered basis from July 15, 1984 to December 15,
1984.
A promissory note was signed by BEDECO'S new president, Alfredo Pangilinan, in the presence of
two directors, committing BEDECO to pay him P300,000 over a six-month period from July 15, 1984 to
December 15, 1984. However, BEDECO paid only P50,000 on July 15, 1984 and another P50,000 on
August 31, 1984 and defaulted in paying the balance of P200,000. On April 30, 1985, Fajilan filed a
complaint in the Regional Trial Court of Makati for collection of that balance from BEDECO.
ISSUES:
Whether or not Petitioner Corporation can acquire its own shares.
RULING:
YES.
The provisions of the Corporation Code should be deemed written into the agreement between the
corporation and the stockholders even if there is no express reference to them in the promissory note.
The principle is well settled that an existing law enters into and forms part of a valid contract without
need for the parties' expressly making reference to it.
The requirement of unrestricted retained earnings to cover the shares is based on the trust fund
doctrine which means that the capital stock, property and other assets of a corporation are regarded as
equity in trust for the payment of corporate creditors. The reason is that creditors of a corporation are
preferred over the stockholders in the distribution of corporate assets. There can be no distribution of
assets among the stockholders without first paying corporate creditors. Hence, any disposition of
corporate funds to the prejudice of creditors is null and void.
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J. M. TUASON & CO., INC., represented by it Managing PARTNER, GREGORIA ARANETA, INC.
vs.
QUIRINO BOLAOS
G.R. No. L-4935. May 28, 1954
FACTS:
The complaint described the land as a portion of a lot registered in the name of the plaintiff and
as containing an area of 13 hectares more or less. But the complaint was amended by reducing the area
of 6 hectares after the defendant had indicated the plaintiffs surveyors the portion of the land claimed
and occupied by him. The defendant set up the defense of prescription.
After trial, the lower court rendered judgment for plaintiff, declaring defendant to be without any
right to the land in question and ordering him to restore possession thereof to plaintiff and to pay the
latter a monthly rent.
ISSUE:
Whether or not the trial court erred in not dismissing the case on the ground that the case was
not brought by the real party in interest.
RULING:
NO.
There is nothing to the contention that the persent action is not brought by the real party in
interest, that is, by J. Tuason & Co., Inc. The Rules of Court requires that action must be brought in the
name of the real party in interest.
The practice is for an attorney-at-law to bring the action that is to file the complaint, in the name
of the plaintiff. That practice appears to have been followed in this case, since the case is signed by the
law firm of Araneta and Araneta, counsel for plaintiff and commences with the statement comes
plaintiff, through its undersigned counsel. It is true that the complaint also states that the plaintiff is
represented herein by its Managing Partner Gregorio Araneta, Inc. another corporation, but there is
nothing against one corporation being represented by another person, natural or juridical, in suit in
court.
The contention that Gregorio Araneta, Inc. cannot act as managing partner for plaintiff on the
theory that it is illegal for two corporations to enter into partnership is without merit, for the true rule is
that through a corporation has no power to enter into a partnership, it nevertheless enter into a joint
venture with the another where the nature of that venture is in line with the business authorized by its
charter.
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ERNESTINA CRISOLOGO-JOSE
vs.
COURT OF APPEALS and RICARDO S. SANTOS, JR. in his own behalf and as Vice-President for
Sales of Mover Enterprises, Inc
G.R. No. 80599. September 15, 1989
FACTS:
In 1980, plaintiff Ricardo S. Santos, Jr. was the vice-president of Mover Enterprises, Inc. incharge of marketing and sales; and the president of the said corporation was Atty. Oscar Z. Benares. On
April 30, 1980, Atty. Benares, in accommodation of his clients, the spouses Jaime and Clarita Ong,
issued Check No. 093553 drawn against Traders Royal Bank, dated June 14, 1980, in the amount of
P45,000.00 payable to defendant Ernestina Crisologo-Jose. Since the check was under the account of
Mover Enterprises, Inc., the same was to be signed by its president, Atty. Oscar Z. Benares, and the
treasurer of the said corporation. However, since at that time, the treasurer of Mover Enterprises was
not available, Atty. Benares prevailed upon the plaintiff, Ricardo S. Santos, Jr., to sign the aforesaid
check as an alternate story. Plaintiff Ricardo S. Santos, Jr. did sign the check.
It appears that the check was issued to defendant Ernestina Crisologo-Jose in consideration of
the waiver or quitclaim by said defendant over a certain property which the Government Service
Insurance System (GSIS) agreed to sell to the clients of Atty. Oscar Benares, the spouses Jaime and
Clarita Ong. However, since the compromise agreement was not approved within the expected period of
time, the aforesaid check for P45,000.00 was replaced by Atty. Benares with another Traders Royal Bank
check dated August 10, 1980, in the same amount.
ISSUE:
liable.
Whether or not the accommodation party is Mover Enterprises, Inc. and hence should be made
RULING:
NO.
The provision of the Negotiable Instruments Law which holds an accommodation party liable on
the instrument to a holder for value, although such holder at the time of taking the instrument knew
him to be only an accommodation party, does not include nor apply to corporations which are
accommodation parties. This is because the issue or indorsement of negotiable paper by a corporation
without consideration and for the accommodation of another is ultra vires. Hence, one who has taken
the instrument with knowledge of the accommodation nature thereof cannot recover against a
corporation where it is only an accommodation party. If the form of the instrument, or the nature of the
transaction, is such as to charge the indorsee with knowledge that the issue or indorsement of the
instrument by the corporation is for the accommodation of another, he cannot recover against the
corporation thereon.
By way of exception, an officer or agent of a corporation shall have the power to execute or indorse
a negotiable paper in the name of the corporation for the accommodation of a third person only if
specifically authorized to do so. Corollarily, corporate officers, such as the president and vice-president,
have no power to execute for mere accommodation a negotiable instrument of the corporation for their
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IRINEO G. CARLOS
vs.
MINDORO SUGAR CO., ET AL.
G.R. No. L-36207. October 26, 1932
FACTS:
The Mindoro Sugar Company is a corporation constituted in accordance with the laws of the
country and registered on July 30, 1917. According to its articles of incorporation, one of its principal
purposes was to acquire and exercise the franchise granted by Act No. 2720 to George H. Fairchild, to
substitute the organized corporation, the Mindoro Company, and to acquire all the rights and
obligations of the latter and of Horace Havemeyer and Charles J. Welch in the so-called San Jose Estate
in the Province of Mindoro.
The Philippine Trust Company is another domestic corporation, registered on October 21, 1917.
In its articles of incorporation, some of its purposes are expressed thus: "To acquire by purchase,
subscription, or otherwise, and to invest in, hold, sell, or otherwise dispose of stocks, bonds, mortgages,
and other securities, or any interest in either, or any obligations or evidences of indebtedness, of any
other corporation or corporations, domestic or foreign.
In pursuance of this resolution, the Mindoro Sugar Company executed in favor of the Philippine
Trust Company the deed of trust transferring all of its property to it in consideration of the bonds it had
issued to the value of P3,000,000.
The Philippine Trust Company sold thirteen bonds, Nos. 1219 to 1231, to Ramon Diaz for
P27,300, at a net profit of P100 per bond. The four bonds Nos. 1219, 1220, 1221, and 1222, here in
litigation, are included in the thirteen sold to Diaz. The Philippine Trust Company paid the appellant,
upon presentation of the coupons, the stipulated interest from the date of their maturity until the 1st of
July, 1928, when it stopped payments; and thenceforth it alleged that it did not deem itself bound to pay
such interest or to redeem the obligation because the guarantee given for the bonds was illegal and void.
ISSUE:
Whether or not Philippine Trust Company bound itself legally and acted within its corporate
powers in guaranteeing the four bonds in question.
RULING:
YES.
The Philippine Trust Company has full powers to acquire personal property such as the bonds in
question. Being authorized to acquire the bonds, it was given implied power to guarantee them in order
to place them upon the market under better, more advantageous conditions, and thereby secure the
profit derived from their sale. It is not, however, ultra vires for a corporation to enter into contracts of
guaranty or suretyship where it does so in the legitimate furtherance of its purposes and business. And
it is well settled that where a corporation acquires commercial paper or bonds in the legitimate
transaction of its business it may sell them, and in furtherance of such a sale it may, in order to make
them the more readily marketable, indorse or guarantee their payment.
Guaranties of payment of bonds taken by a loan and trust company in the ordinary course of its
business, made in connection with their sale, are not ultra vires, and are binding.
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act.
Whether or not the donation made by the corporation of the proceeds of the insurance is a valid
RULING:
YES.
Even assuming that the donation was ultra vires, still it cannot be invalidated or declared legally
ineffective for that reason alone, it appearing that the donation represents not only the act of the Board
but also that of the stockholders themselves since they expressly ratified the resolution. By this
ratification, the infirmity of the corporate act, if any, has been obliterated thereby making the act
perfectly valid and enforceable, especially so if the donation is not merely executory but consummated.
The defense of ultra vires cannot be set up against completed or consummated transactions.
An ultra vires act may either be an act performed merely outside the scope of the powers granted
to the corporation by its AOI or one which is contrary to law or violative of any principle which would
void any contract. A distinction has to be made with respect to corporate acts which are illegal and those
merely ultra vires. The former are contrary to law, morals, public order or policy, while the latter are not
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BY-LAWS
Function
DILY DANY NACPIL
vs.
INTERNATIONAL BROADCASTING CORPORATION
G.R. No. 144767. March 21, 2002
FACTS:
Petitioner was Assistant General Manager for Finance/Administration and Comptroller of private
respondent Intercontinental Broadcasting Corporation (IBC) from 1996 until April 1997. According to
petitioner, when Emiliano Templo was appointed to replace IBC President Tomas Gomez III sometime in
March 1997, the former told the Board of Directors that as soon as he assumes the IBC presidency, he
would terminate the services of petitioner. Apparently, Templo blamed petitioner, along with a certain
Mr. Basilio and Mr. Gomez, for the prior mismanagement of IBC. Upon his assumption of the IBC
presidency, Templo allegedly harassed, insulted, humiliated and pressured petitioner into resigning until
the latter was forced to retire. However, Templo refused to pay him his retirement benefits, allegedly
because he had not yet secured the clearances from the Presidential Commission on Good Government
and the Commission on Audit.
IBC filed a motion to dismiss contending that petitioner was a corporate officer who was duly
elected by the Board of Directors of IBC; hence, the case qualifies as an intra-corporate dispute falling
within the jurisdiction of the SEC.
On the other hand, petitioner argues that he is not a corporate officer of IBC but an employee
thereof since he had not been elected nor appointed as Comptroller and Assistant Manager by the IBC's
Board of Directors but by an IBC General Manager. This is also because the IBC's By-Laws do not even
include the position of comptroller in its roster of corporate officers.He therefore contends that his
dismissal is a controversy falling within the jurisdiction of the labor courts.
ISSUE:
Whether or not petitioner is a corporate officer although the position of comptroller is not
expressly mentioned in the by-laws.
RULING:
NO.
The fact that the position of Comptroller is not expressly mentioned among the officers of the IBC
in the By-Laws is of no moment, because the IBC's Board of Directors is empowered under Section 25 of
the Corporation Code and under the corporation's By-Laws to appoint such other officers as it may
deem necessary.
The by-laws may and usually do provide for such other officers," and that where a corporate office
is not specifically indicated in the roster of corporate offices in the by-laws of a corporation, the board of
directors may also be empowered under the by-lawsto create additional officers as may be necessary.
Furthermore, as petitioner's appointment as comptroller required the approval and formal action of the
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PMI COLLEGES
vs.
THE NATIONAL LABOR RELATIONS COMMISSION and ALEJANDRO GA LVA N
G.R. No. 121466. August 15, 1997
FACTS:
On July 7, 1991, petitioner, an educational institution offering courses on basic seaman's
training and other marine-related courses, hired private respondent as contractual instructor with an
agreement that the latter shall be paid at an hourly rate of P30.00 to P50.00, depending on the
description of load subjects and on the schedule for teaching the same. Pursuant to this engagement,
private respondent then organized classes in marine engineering.
Initially, private respondent and other instructors were compensated for services rendered during
the first three periods of the abovementioned contract. However, for reasons unknown to private
respondent, he stopped receiving payment for the succeeding rendition of services. This claim of nonpayment was embodied in a letter dated March 3, 1992, written by petitioner's Acting Director, Casimiro
A. Aguinaldo, addressed to its President, Atty. Santiago Pastor, calling attention to and appealing for the
early approval and release of the salaries of its instructors including that of private respondent.
Private respondent's claims, were resisted by petitioner. Later in the proceedings, PMI Colleges
manifested that Mr. Tomas Cloma Jr., a member of the board of trustees write a letter to the Chairman
of the Board, clarifying the case of Galvan and stating therein, inter alia, that under PMIs by-laws only
the Chairman is authorized to sign any contract and that Galvan, in any event, failed to submit
documents on the alleged shipyard and plant visits in Cavite Naval Base.
ISSUE:
Whether or not the contract of employment of Galvan valid even if the signatory therein was not
the Chairman of the Board.
RULING:
YES.
The contract of employment is valid. The contract remained valid even if the signatory thereon
was not the chairman of the board which allegedly violated petitioners by-laws. Since by-laws operate
merely as internal rules among the stockholders, they cannot affect or prejudice third persons who deal
with the corporation, unless they have knowledge of the same. No proof appears on record that private
respondent ever knew anything about the provisions of the said by-laws. In fact, petitioner itself merely
asserts the same without even bothering to attach a copy or excerpt thereof to show that there is such
provision. That this allegation has never been denied to private respondent nor necessarily signify
admission of its existence because technicalities of law and procedure and the rules obtaining in the
courts of law do not strictly apply to proceeding of this nature.
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CITIBANK, N.A.
vs.
HON. SEGUNDINO G. CHUA, SANTIAGO M. KAPUNAN and LUIS L. VICTOR, ASSOCIATE JUSTICES
OF THE HON. COURT OF APPEALS, THIRD DIVISION, MANILA, HON. LEONARDO B. CANARES,
Judge of Regional, Trial Court of Cebu, Branch 10, and SPOUSES CRESENCIO AND ZENAIDA
VELEZ
G.R. No. 102300. March 17, 1993
FACTS:
Citibank is a foreign commercial banking corporation duly licensed to do business in the
Philippines. Private respondents, spouses Cresencio and Zenaida Velez, who were good clients alleged
that the petitioner bank extended to them credit lines sufficiently secured with real estate and chattel
mortgages on equipment. They claim that a restructuring agreement has been entered into between
them and the bank. However, the bank failed to comply thereto thus spouses Velez sued for specific
performance and damages.
On March 30, 1990, the date of the pre-trial conference, counsel for petitioner bank appeared,
presenting a special power of attorney executed by Citibank officer Florencia Tarriela in favor of
petitioner bank's counsel, the J.P. Garcia & Associates, to represent and bind petitioner bank at the pretrial conference of the case at bar. Inspite of this special power of attorney, counsel for spouses Velez
orally moved to declare petitioner bank as in default on the ground that the special power of attorney
was not executed by the Board of Directors of Citibank. Thus petitioner bank executed another special
power of attorney made by William W. Ferguson, Vice President and highest ranking officer of Citibank,
Philippines, constituting and appointing the J.P. Garcia & Associates to represent and bind the BANK.
Unsatisfied, private respondents moved again for declaration of default. Though the bank again executed
anotherspecial power of attorney through William W. Ferguson in favor of Citibank employees, the court
issued an order declaring petitioner bank as in default. The CA dismissed the petition filed by the bank.
The CA relied on Section 46 of the Corporation Code to support its conclusion that the by-laws in
question are without effect because they were not approved by the SEC.
ISSUE:
Whether or not petitioner bank's by-laws, which constitute the basis for Ferguson's special power
of attorney in favor of petitioner bank's legal counsel are effective, considering that petitioner bank has
been previously granted a license to do business in the Philippines.
RULING:
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The Supreme Court ruled that the non-filing of the by-laws within the period of 1 month from the
issuance by SEC of the Certificate of Incorporation will not result to the automatic dissolution of the
corporation because the word MUST in Sec 46 of the Corporation Code is merely directory not
mandatory in meaning. In fact the second paragraph allows the filing of by-laws even prior to
incorporation.
This provision of the Code rules out mandatory compliance with the requirement of filing the bylaws "within one (1) month after receipt of official notice of the issuance of its certificate of incorporation
by the Securities and Exchange Commission." It necessarily follows that failure to file the by-laws within
that period does not imply the "demise" of the corporation. By-laws may be necessary for the
"government" of the corporation but these are subordinate to the articles of incorporation as well as to
the Corporation Code and related statutes.
RULING:
YES.
The by-law is of course a patent nullity, since it is in direct conflict with the latter part of section
187 of the Corporation Law, which expressly declares that the board of directors shall not have the
power to force the surrender and withdrawal of unmatured stock except in case of liquidation of the
corporation or of forfeiture of the stock for delinquency. It is agreed that this provision of the by-laws has
never been enforced, and in fact no attempt has ever been made by the board of directors to make use of
the power therein conferred. It appears, however, that no annual meeting of the shareholders called
since that date has been attended by a sufficient number of shareholders to constitute a quorum, with
the result that the provision referred to has no been eliminated from the by-laws, and it still stands
among the by-laws of the association, notwithstanding its patent conflict with the law.
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Quorum Required
THE BOARD OF DIRECTORS And ELECTION COMMITTEE OF THE SMB WORKERS SAVINGS AND
LOAN ASSOCIATION, INC., ET AL.
vs.
HON BIENVENIDO A. TAN, ETC., ET AL.
G.R. No. L-12282 1959
March 31
FACTS:
On January 17, 1957 John de Castillo et al., commenced a suit in the Court of First Instance of
Manila to declare null and void the election of the members of the board of directors of the SMB Workers
Savings and Loan Association, Inc. and of the members of the Election Committee for the year 1957 held
on January 11 and 12 and to compel the board of directors of the association to call for and hold
another election in accordance with its constitution and by-laws and the Corporation Law. Such was
granted by the court, however, another suit was filed alleging that the subsequent meeting for the
elections would not be in accordance with the constitution and by-laws regarding notice to the
stockholders.
ISSUE:
Whether or not proper notice was given as regards the new meeting for the elections of the board
of directors.
RULING:
NO.
There was no proper notice. Notice of a special meeting of members should be given at least five
days before the date of the meeting. It appears that the notice was posted on 26 March and the election
was set for 28 March. Therefore, the five days previous notice required would not be complied with.
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Who Presides
ABELARDO JAVELLANA, TOMAS JONCO, et al., in their capacities as Councilors of the Municipal
Municipality of Buenavista, Province of Iloilo
vs.
SUSANO TAYO, as Mayor of the Municipal Municipality of Buenavista, Iloilo
G.R. No. L-18919
December 29, 1962
FACTS:
Petitioners were members of the municipal council. On several sessions, the mayor, herein
defendant, was absent prompting the council to decide emong themselves as to who to appoint as
presiding officers. The mayor refused to act on the resulting minutes also refused to sign the payrolls of
the council covering the per diems of the petitioners, alleging that the proceedings were illegal due to his
absence.
Despite the Provincial Fiscal and the Provincial Board upholding the controverted sessions of the
Municipal Council, the Mayor refused and still refuses to recognize the validity of the acts of the
Municipal Council and the legality of its regular session held in his absence.
The trial court ruled that attendance of the Mayor is not essential to the validity of the session as
long as there is quorum constituted in accordance with law. To declare that the proceedings of the
petitioners were null and void, is to encourage recalcitrant public officials who would frustrate valid
sessions for political end or consideration.
ISSUE:
Whether or not the sessions held by petitioners were valid and legal, having constituted a
quorum, and despite the absence of the defendant.
RULING:
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ISSUE:
voting.
Whether or not SEC acted with grave abuse of discretion in not permanently enjoining VIMC in
RULING:
NO.
SC found no grave abuse of discretion on the part of the SEC in not restraining VIMC. It adopted
the SEC resolution stating that the sale of the shares of stock had long been perfected and is presumed
valid until declared otherwise. As against this presumption, petitioners' prayer for injunction cannot
prevail as the issue of the validity of the sale is still to be resolved by the SEC.
Considering that the shares constitute the majority, it is more equitable that the same be allowed
to vote rather than be enjoined. As it has been ruled the removal of a majority SH from the management
of the corporation and/or the dissolution of a corporation in a suit filed by a minority SH is a drastic
measure. It should be resorted to only when the necessity is clear. With more reason, the Court will not
deprive a SH of his right to vote his shares in the annual SHs' meeting, except upon a clear showing of
its lawful denial under the articles of incorporation or by-laws of the corporation, as it is a right inherent
in stock ownership.
Whether or not under and pursuant to section 26 of the Corporation Law, the respondent court
may issue the order complained of.
RULING:
NO.
Article 9 of the by-laws of the Daguhoy Enterprises, Inc., provides: The Board of Directors shall
compose of five (5) members who shall be elected by the stockholders in a general meeting called for that
purpose which shall be held every even year during the month of January. Article 22 of the by-laws
provides: The Chairman shall have the right to fix the date, the time and the place where the general
meeting shall be held, either special or general.
Section 26 of the Corporation Code provides: - Whenever, from any cause, there is no person
authorized to call a meeting, or when the officer authorized to do so refuses, fails, or neglects to call a
meeting, any judge of a Court of First Instance, on the showing of good cause therefor, may issue an
order to any stockholder or member of a corporation, directing him to call a meeting of the corporation
by giving the proper notice required by this Act or the by-laws; and if there be no person legally
authorized to preside at such meeting, the judge of the Court of First Instance may direct the person
calling the meeting to preside at the same until a majority of the members or stockholders representing
a majority of the stock present and permitted by law to be voted have chosen one of their number to act
as presiding officer for the purposes of the meeting.
Petitioners were not deprived of their right without due process of law. They had no right to
continue as directors of the corporation unless reelected by the stockholders in a meeting called for that
purpose every even year.
SALVADOR P. LOPEZ
vs.
ERICTA
G.R. No. L-32991
June 29, 1972
FACTS:
The first such appointment was extended on April 27, 1970, "effective May 1, 1970 until April 30,
1971, unless sooner terminated and subject to the appproval of the Board of Regents and to pertinent
University regulations." Pursuant thereto Dr. Blanco assumed office as ad interim Dean on May 1, 1970.
The Board of Regents met on May 26, 1970, and President Lopez submitted to it the ad interim
appointment of Dr. Blanco for reconsideration. The minutes of that meeting disclose that "the Board
voted to defer action on the matter in view of the objections cited by Regent Kalaw based on the petition
against the appointment, addressed to the Board, from a majority of the faculty and from a number of
alumni Dr. Blanco's appointment had lapsed.
On May 26, 1970, President Lopez extended another ad interim appointment to her, effective from
May 26, 1970 to April 30, 1971, with the same conditions as the first.However, such ad interim
appointment had not been confirmed by the Board of Regents. Due to the following votes: 5-yes, 3-no
and 4-abstain.
On August 18, 1970 Dr. Blanco wrote the President of the University, protesting the appointment
of Oseas A. del Rosario as Officer-in-Charge of the College of Education. Neither communication having
elicited any official reply, Dr. Blanco went to the Court of First Instance of Quezon City on a petition for
certiorari and prohibition with preliminary injunction.
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ISSUE:
Whether or not respondent Dr. Consuelo S. Blanco was duly elected Dean of the College of
Education, University of the Philippines, in the meeting of the Board of Regents on July 9, 1970.
RULING:
NO.
The votes of abstention, viewed in their setting, can in no way be construed as votes for
confirmation of the appointment. There can be no doubt whatsoever as to the decision and
recommendation of the three members of the Personnel Committee: it was for rejection of the
appointment. No inference can be drawn from this that the members of the Personnel Committee, by
their abstention, intended to acquiesce in the action taken by those who voted affirmatively. Neither, for
that matter, can such inference be drawn from the abstention that he was abstaining because he was
not then ready to make a decision.
Dr. Blanco was clearly not the choice of a majority of the members of the Board of Regents, as
unequivocally demonstrated by the transcript of the proceedings. This fact cannot be ignored simply
because the Chairman, in submitting the question to the actual vote, did not frame it as accurately as
the preceding discussion called for, such that two of the Regents present (Silva and Kalaw) had to make
some kind of clarification.
VOTING
Who May Exercise
Wilson P. Gamboa
vs.
Finance Secretary Margarito Teves, et al.,
G.R. No. 176579, June 28, 2011
FACTS:
This is a petition to nullify the sale of shares of stock of Philippine Telecommunications
Investment Corporation (PTIC) by the government of the Republic of the Philippines, acting through the
Inter-Agency Privatization Council (IPC), to Metro Pacific Assets Holdings, Inc. (MPAH), an affiliate of
First Pacific Company Limited (First Pacific), a Hong Kong-based investment management and holding
company and a shareholder of the Philippine Long Distance Telephone Company (PLDT). The petitioner
questioned the sale on the ground that it also involved an indirect sale of 12 million shares (or about 6.3
percent of the outstanding common shares) of PLDT owned by PTIC to First Pacific. With the this sale,
First Pacifics common shareholdings in PLDT increased from 30.7 percent to 37 percent, thereby
increasing the total common shareholdings of foreigners in PLDT to about 81.47%. This, according to
the petitioner, violates Section 11, Article XII of the 1987 Philippine Constitution which limits foreign
ownership of the capital of a public utility to not more than 40%, thus: Section 11. No franchise,
certificate, or any other form of authorization for the operation of a public utility shall be granted except
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LEON J. LAMBERT
vs.
T. J. FOX
G.R. No. L-7991
January 29, 1914
FACTS:
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FACTS:
Sometime in 1988, the NTC served on the PLDT the following assessment notices and demands
for payment: 1. the amount of P7,495,161.00 as supervision and regulation fee under Section 40 (e) of
the PSA for the said year, 1988, computed at P0.50 per P100.00 of the Protestant's (PLDT) outstanding
capital stock as at December 31, 1987 which then consisted of Serial Preferred Stock amounting to
P1,277,934,390.00 and Common Stock of P221,097,785 (Million) or a total of P1,499,032,175.00; 2. the
amount of P9.0 Million as permit fee under Section 40 (f) of the PSA for the approval of the protestant's
increase of its authorized capital stock from P2.7 Billion to P4.5 Billion; and the amounts of
P12,261,600.00 and P33,472,030.00 as permit fees under Section 40(g) of the PSA in connection with
the Commission's decisions in NTC Cases Nos. 86-13 and 87-008 respectively, approving the
Protestant's equity participation in the Fiber Optic Interpacific Cable systems and X-5 Service
Improvement and Expansion Program.
ISSUE:
Whether or not the Court of Appeals erred in holding that the computation of supervision and
regulation fees under section 40 (f) of the public service act should be based on the par value of the
subscribed capital stock.
RULING:
NO.
The basis for computation of the fee to be charged by NTC on PLDT, is the capital stock
subscribed or paid and not, alternatively, the property and equipment. The term "capital" and other
terms used to describe the capital structure of a corporation are of universal acceptance, and their
usages have long been established in jurisprudence. Briefly, capital refers to the value of the property or
assets of a corporation. The capital subscribed is the total amount of the capital that persons
(subscribers or shareholders) have agreed to take and pay for, which need not necessarily be, and can be
more than, the par value of the shares. In fine, it is the amount that the corporation receives, inclusive
of the premiums if any, in consideration of the original issuance of the shares. In the case of stock
dividends, it is the amount that the corporation transfers from its surplus profit account to its capital
account. It is the same amount that can loosely be termed as the "trust fund" of the corporation. The
"Trust Fund" doctrine considers this subscribed capital as a trust fund for the payment of the debts of
the corporation, to which the creditors may look for satisfaction. Until the liquidation of the corporation,
no part of the subscribed capital may be returned or released to the stockholder (except in the
redemption of redeemable shares) without violating this principle. Thus, dividends must never impair
the subscribed capital; subscription commitments cannot be condoned or remitted; nor can the
corporation buy its own shares using the subscribed capital as the consideration therefor.
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Voting v. Non-Voting
CECILIA CASTILLO, et al., and MEDICAL CENTER PARAAQUE, INC.
vs.
ANGELES BALINGHASAY, et al.
G.R. No. 150976
October 18, 2004
FACTS:
Petitioners are stockholders of MCPI holding Class B shares while the respondents are also
stockholders owning Class A shares. In a 1992 amendment of the Articles of Incorporation of MCPI,
the Articles of incorporation of the MCPI provides that, except when otherwise provided by law, only
holders of Class A shares are entitled to vote and to have the right to be elected as directors and
corporate officers.
During the 2001meeting, petitioners raised an objection to the fact that only Class A shares are
allowed to vote and to be elected. They contended that the Class B share holders right to vote is
violated in violation of law.
ISSUE:
Whether or not holders of Class B shares of MCPI may be deprives of the right to vote and be
voted for as directors.
RULING:
NO.
The 1992 amendment contains a proviso except as otherwise provided for by law the law being
referred to by the proviso is that which is in force at the time of the amendment, in this case, was the
Corporation Code.
Under Sec. 6 of the Corporation Code, it provides that no share may be deprived of voting rights
except those classified and issued as preffered or redeemable shares unless otherwise provided in
this code.there is nothing in the articles of incorporation or an iota of evidence on record that shows
that Class B shares were categorized as either preffered or redeemable shares.
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voting.
Whether or not SEC acted with grave abuse of discretion in not permanently enjoining VIMC in
RULING:
YES.
SC found no grave abuse of discretion on the part of the SEC in not restraining VIMC. It adopted
the SEC resolution stating that the sale of the shares of stock had long been perfected and is presumed
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Redeemable Preferred
REPUBLIC PLANTERS BANK
vs.
HON. ENRIQUE A. AGANA, SR., as Presiding Judge, Court of First Instance of Rizal, Branch
XXVIII, Pasay City, ROBES-FRANCISCO REALTY & DEVELOPMENT CORPORATION and ADALIA F.
ROBES
G.R. No. 51765. March 3, 1997
FACTS:
On September 18, 1961, private respondent Corporation secured a loan from petitioner in the
amount of P120,000.00. Instead of giving the legal tender totaling to the full amount of the loan, which
is P120,000.00, petitioner lent such amount partially in the form of money and partially in the form of
stock certificates numbered 3204 and 3205, each for 400 shares with a par value of P10.00 per share, or
for P4,000.00 each, for a total of P8,000.00. Said stock certificates were in the name of private
respondent Adalia F. Robes and Carlos F. Robes, who subsequently, however, endorsed his shares in
favor of Adalia F. Robes.
On January 31, 1979, private respondents proceeded against petitioner and filed a Complaint
anchored on private respondents' alleged rights to collect dividends under the preferred shares in
question and to have petitioner redeem the same under the terms and conditions of the stock
certificates.
The trial court rendered the herein assailed decision in favor of private respondents ordering
petitioner to pay private respondents the face value of the stock certificates as redemption price, plus 1%
quarterly interest thereon until full payment.
ISSUES:
Whether or not the respondent court was correct in ordering petitioner to pay private respondents
the face value of the stock certificates as redemption price.
RULING:
NO.
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Treasury
COMMISSIONER OF INTERNAL REVENUE
vs.
MANNING, MCDONALD, SIMMONS
No. L-28398
6 August 1975
FACTS:
In 1952 the MANTRASCO had an authorized capital stock of P2,500,000 divided into 25,000
common shares; 24,700 of these were owned by Julius S. Reese, and the rest, at 100 shares each, by
the three respondents.
On October 19, 1954 Reese died. In 1955, after MANTRASCO made a partial payment of Reese's
shares, the certificate for the 24,700 shares in Reese's name was cancelled and a new certificate was
issued in the name of MANTRASCO, which was endorsed to the law firm of Ross, Selph, Carrascoso and
Janda, as trustees for and in behalf of MANTRASCO. In 1958, at a special meeting of MANTRASCO
stockholders, the following resolution was passed:"RESOLVED, that the 24,700 shares in the Treasury be
reverted back to the capital account of the company as a stock dividend to be distributed to shareholders of
record."
In 1963 the entire purchase price of Reese's interest in MANTRASCO was finally paid in full by
the latter, In 1964 the trust agreement was terminated and the trustees delivered to MANTRASCO all
the shares which they were holding in trust. On the basis of their examination, the BIR examiners
concluded that the distribution of Reese's shares as stock dividends was in effect a distribution of the
"asset or property of the corporation as may be gleaned from the payment of cash for the redemption of
said stock and distributing the same as stock dividend." On April 14, 1965 the CIR issued notices of
assessment for deficiency income taxes to the respondents for the year 1958.
ISSUE:
Whether or not the issuance of the notices of assessment for deficiency income taxes to the
respondents for the year 1958 was proper.
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RULING:
YES.
The rescission of the Pre-Subscription Agreement will effectively result in the unauthorized
distribution of the capital assets and property of the corporation, thereby violating the Trust Fund
Doctrine and the Corporation Code, since rescission of a subscription agreement is not one of the
instances when distribution of capital assets and property of the corporation is allowed. Rescission will,
in the final analysis, result in the premature liquidation of the corporation without the benefit of prior
dissolution in accordance with Sections 117, 118, 119 and 120 of the Corporation Code.
What is a Subscription
ONG YONG, et al., petitioner
vs.
TIU, et al., respondent
G.R. No. 144476
8 April 2003
FACTS:
In 1994, the construction of the Masagana Citimall in Pasay City was threatened with stoppage
and incompletion when its owner, the First Landlink Asia Development Corporation (FLADC), which was
owned by David S. Tiu, Cely Y. Tiu, Moly Yu Gow, Belen See Yu, D. Terence Y. Tiu, John Yu and Lourdes
C. Tiu (the Tius), encountered dire financial difficulties. It was heavily indebted to the Philippine
National Bank (PNB) for P190 million. To stave off foreclosure of the mortgage on the two lots where the
mall was being built, the Tius invited Ong Yong, Juanita Tan Ong, Wilson T. Ong, Anna L. Ong, William
T. Ong and Julia Ong Alonzo (the Ongs), to invest in FLADC. Under the Pre-Subscription Agreement they
entered into, the Ongs and the Tius agreed to maintain equal shareholdings in FLADC: the Ongs were to
subscribe to 1,000,000 shares at a par value of P100.00 each while the Tius were to subscribe to an
additional 549,800 shares at P100.00 each in addition to their already existing subscription of 450,200
shares. Furthermore, they agreed that the Tius were entitled to nominate the Vice-President and the
Treasurer plus 5 directors while the Ongs were entitled to nominate the President, the Secretary and 6
directors (including the chairman) to the board of directors of FLADC. Moreover, the Ongs were given the
right to manage and operate the mall. Accordingly, the Ongs paid P100 million in cash for their
subscription to 1,000,000 shares of stock while the Tius committed to contribute to FLADC a four-storey
building and two parcels of land respectively valued at P20 million (for 200,000 shares), P30 million (for
300,000 shares) and P49.8 million (for 49,800 shares) to cover their additional 549,800 stock
subscription therein. The Ongs paid in another P70 million 3 to FLADC and P20 million to the Tius over
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MANUEL C. ESPIRITU, JR., AUDIE LLONA, FREIDA F. ESPIRITU, CARLO F. ESPIRITU, RAFAEL F.
ESPIRITU, ROLANDO M. MIRABUNA, HERMILYN A. MIRABUNA, KIM ROLAND A. MIRABUNA,
KAYE ANN A. MIRABUNA, KEN RYAN A. MIRABUNA, JUANITO P. DE CASTRO, GERONIMA A.
ALMONITE and MANUEL C. DEE, who are the officers and directors of BICOL GAS REFILLING
PLANT CORPORATION
vs.
PETRON CORPORATION and CARMEN J. DOLOIRAS, doing business under the name "KRISTINA
PATRICIA ENTERPRISES,
G.R. No. 170891
November 24, 2009
FACTS:
Petron sold and distributed LPG in cylinder tanks that carried its trademark
"Gasul."1 Respondent Carmen J. Doloiras owned and operated Kristina Patricia Enterprises, the
exclusive distributor of Gasul LPGs in the whole of Sorsogon. Jose Nelson Doloiras served as KPEs
manager. Bicol Gas Refilling Plant Corporation was also in the business of selling and distributing LPGs
in Sorsogon but theirs carried the trademark "Bicol Savers Gas." Petitioner Audie Llona managed Bicol
Gas.
On August 4, 2001 KPEs Jose saw a particular Bicol Gas truck on the Maharlika Highway. While
the truck carried mostly Bicol Savers LPG tanks, it had on it one unsealed 50-kg Gasul tank and one
50-kg Shellane tank. He offered to make a swap for these but Llona declined, saying the Bicol Gas
owners wanted to send those tanks to Batangas. Later Bicol Gas told Jose that it had no more Gasul
tanks left in its possession.
ISSUE:
Whether or not all the Petitioners are liable.
RULING:
NO.
The "owners" of a corporate organization are its stockholders and they are to be distinguished
from its directors and officers. The petitioners here, with the exception of Audie Llona, are being charged
in their capacities as stockholders of Bicol Gas. But the Court of Appeals forgets that in a corporation,
the management of its business is generally vested in its board of directors, not its
stockholders. Stockholders are basically investors in a corporation. They do not have a hand in running
the day-to-day business operations of the corporation unless they are at the same time directors or
officers of the corporation. Before a stockholder may be held criminally liable for acts committed by the
corporation, therefore, it must be shown that he had knowledge of the criminal act committed in the
name of the corporation and that he took part in the same or gave his consent to its commission,
whether by action or inaction.
The finding of the Court of Appeals that the employees "could not have committed the crimes
without the consent, [abetment], permission, or participation of the owners of Bicol Gas" is a sweeping
speculation especially since, as demonstrated above, what was involved was just one Petron Gasul tank
found in a truck filled with Bicol Gas tanks. Although the KPE manager heard petitioner Llona say that
he was going to consult the owners of Bicol Gas regarding the offer to swap additional captured
cylinders, no indication was given as to which Bicol Gas stockholders Llona consulted. It would be
unfair to charge all the stockholders involved, some of whom were proved to be minors. No evidence was
presented establishing the names of the stockholders who were charged with running the operations of
Bicol Gas. The complaint even failed to allege who among the stockholders sat in the board of directors
of the company or served as its officers.
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CRISOSTOMO, petitioner
vs.
S.E.C, respondent
G.R. Nos. 89095 & 89555
November 6, 1989
FACTS:
Sixto Crisostomo, Felipe Crisostomo (deceased), Veronica Palanca, Juanito Crisostomo, Carlos
Crisostomo, Ricardo Alfonso, Regino Crisostomo and Ernesto Crisostomo (known as the Crisostomo
group) were the original stockholders of the United Doctors Medical Center (UDMC) which was organized
in 1968 with an authorized capital stock of P1,000,000 (later increased to P15,000,000 in 1972). They
owned approximately 40% of UDMC's outstanding capital stock, while the 60% majority belonged to the
members of the United Medical Staff Association (UMSA), numbering approximately 150 doctors and
medical personnel of UDMC.
In 1988, UDMC defaulted in paying its loan obligation of approximately P55 million to the DBP. In
the last quarter of 1987, UDMC's assets (principally its hospital) and those of the Crisostomos which
had been given as collateral to the DBP, faced foreclosure by the Asset Privatization' rust (APT), which
had taken over UDMC's loan obligation to the DBP.
To stave off the threatened foreclosure, UDMC, through its principal officers, Ricardo Alfonso and
Juanito Crisostomo, persuaded the Yamadas and Enatsu (Shoji Yamada and Tomotada Enatsu are
Japanese doctors) to invest fresh capital in UDMC. The wife of Tomotada Enatsu, Edita Enatsu, is a
Filipina. They invested approximately P57 million in UDMC.
The investment was effected by means of: (1) a Stock Purchase Agreement; and (2) an Amended
Memorandum of Agreement whereby the group subscribed to 82.09% of the outstanding shares of
UDMC. Upon the completion of the governmental approval process, shares of stock, duly signed by
UDMC's authorized officers, were issued to the Yamadas and Enatsus.
As it had been agreed in the Amended Memorandum of Agreement between UDMC and the
Japanese group that upon the latter's acquisition of the controlling interest in UDMC, the corporation
would be reorganized, a special stockholders' meeting and board of directors' meeting were scheduled to
be held on August 20, 1988.
ISSUE:
Whether or not the investment of the Japanese group in UDMC is unconstitutional.
RULING:
NO.
While 82% of UDMC's capital stock is indeed subscribed by the Japanese group, only 30%
(equivalent to 171,721 shares or P17,172.00) is owned by the Japanese citizens, namely, the Yamada
spouses and Tomotada Enatsu. 52% is owned by Edita Enatsu, who is a Filipino. Accordingly, in its
application for approval/registration of the foreign equity investments of these investors, UDMC declared
that 70% of its capital stock is owned by Filipino citizens, including Edita Enatsu. That application was
approved by the Central Bank on August 3, 1988.
The investments in UDMC of Doctors Yamada and Enatsu do not violate the Constitutional
prohibition against foreigners practising a profession in the Philippines (Section 14, Article XII, 1987
Constitution) for they do not practice their profession (medicine) in the Philippines, neither have they
applied for a license to do so. They only own shares of stock in a corporation that operates a hospital. No
law limits the sale of hospital shares of stock to doctors only. The ownership of such shares does not
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NICOLAS, petitioner
vs.
COURT OF APPEALS, respondent
G.R. No. 122857
March 27, 1998
FACTS:
On February 19, 1987, petitioner Roy Nicolas and private respondent Blesito Buan entered into a
Portfolio Management Agreement, wherein the former was to manage the stock transactions of the latter
for a period of three months with an automatic renewal clause. However, upon the initiative of the
private respondent the agreement was terminated on August 19, 1987, and thereafter he requested for
an accounting of all transactions made by the petitioner.
Three weeks after the termination of the agreement, petitioner demanded from the private
respondent the amount of P68,263.67 representing his alleged management fees covering the periods of
June 30, July 31 and August 19, 1987 as provided for in the Portfolio Management Agreement. But the
demands went unheeded, much to the chagrin of the petitioner.
Rebuffed, petitioner filed a complaint for collection of sum of money against the private
respondent before the trial court. In his answer, private respondent contended that petitioner
mismanaged his transactions resulting in losses, thus, he was not entitled to any management fees.
ISSUE:
Whether or not petitioner is entitled to management fees.
RULING:
NO.
To begin with, petitioner has the burden to prove that the transaction realized gains or profits to
entitle him to said management fees, as provided in the Agreement. Accordingly, petitioner submitted
the profit and loss statements for the period of June 30, July 31 and August 19, 1987, showing a total
profit of P341,318.34, of which 20% would represent his management fees amounting to P68,263.70.
Unfortunately, the profit and loss statements presented by the petitioner are nothing but bare
assertions, devoid of any concrete basis or specifics as to the method of arriving at the amounts
indicated in the documents. In fact, it did not even state when the stocks were purchased, the type of
stocks (whether Class A or B or common or preferred) bought, when the stocks were sold, the
acquisition and selling price of each stock, when the profits, if any, were delivered to the private
respondent, the cost of safekeeping or custody of the stocks, as well as the taxes paid for each
transaction. With respect to the alleged losses, it has been held that where a profit or loss statement
shows a loss, the statement must show income and items of expense to explain the method of
determining such loss. However, in the instant petition, petitioner hardly elucidated the reasons and the
factors behind the losses incurred in the course of the transactions.
In short, no evidentiary value can be attributed to the profit and loss statements submitted by
the petitioner. These documents can hardly be considered a credible or true reflection of the
transactions. It is an incomplete record yielding easily to the inclusion or deletion of certain
matters. The contents are subject to suspicion since they are not reflective of all pertinent and relevant
data. Thus, even assuming the admissibility of these alleged profit and loss statements, they are devoid
of any evidentiary weight, for the amounts are conclusions without premises, its bases left to
speculation, conjectures, assertions and guesswork.
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APODACA, petitioner
vs.
NATIONAL LABOR RELATIONS COMMISSION, respondent
G.R. No. 80039
April 18, 1989
FACTS:
Petitioner was employed in respondent corporation. On August 28, 1985, respondent Jose M.
Mirasol persuaded petitioner to subscribe to 1,500 shares of respondent corporation at P100.00 per
share or a total of P150,000.00. He made an initial payment of P37,500.00. On September 1, 1975,
petitioner was appointed President and General Manager of the respondent corporation. However, on
January 2, 1986, he resigned.
On December 19, 1986, petitioner instituted with the NLRC a complaint against private
respondents for the payment of his unpaid wages, his cost of living allowance, the balance of his gasoline
and representation expenses and his bonus compensation for 1986. Petitioner and private respondents
submitted their position papers to the labor arbiter. Private respondents admitted that there is due to
petitioner the amount of P17,060.07 but this was applied to the unpaid balance of his subscription in
the amount of P95,439.93. Petitioner questioned the set-off alleging that there was no call or notice for
the payment of the unpaid subscription and that, accordingly, the alleged obligation is not enforceable.
In a decision dated April 28, 1987, the labor arbiter sustained the claim of petitioner for
P17,060.07 on the ground that the employer has no right to withhold payment of wages already earned
under Article 103 of the Labor Code. Upon the appeal of the private respondents to public respondent
NLRC, the decision of the labor arbiter was reversed in a decision dated September 18, 1987. The NLRC
held that a stockholder who fails to pay his unpaid subscription on call becomes a debtor of the
corporation and that the set-off of said obligation against the wages and others due to petitioner is not
contrary to law, morals and public policy.
ISSUE:
Whether or not an obligation arising from non-payment of stock subscriptions to a corporation
can be offset against a money claim of an employee against the employer.
RULING:
NO.
The unpaid subscriptions are not due and payable until a call is made by the corporation for
payment. Private respondents have not presented a resolution of the board of directors of respondent
corporation calling for the payment of the unpaid subscriptions. It does not even appear that a notice of
such call has been sent to petitioner by the respondent corporation.
What the records show is that the respondent corporation deducted the amount due to petitioner
from the amount receivable from him for the unpaid subscriptions. No doubt such set-off was without
lawful basis, if not premature. As there was no notice or call for the payment of unpaid subscriptions,
the same is not yet due and payable.
Lastly, assuming further that there was a call for payment of the unpaid subscription, the NLRC
cannot validly set it off against the wages and other benefits due petitioner. Article 113 of the Labor
Code allows such a deduction from the wages of the employees by the employer, only in three instances,
to wit: No employer, in his own behalf or in behalf of any person, shall make any deduction from the
wages of his employees, except in certain cases.
FACTS:
An operating agreement was executed before World War II (on 30 January 1937) between Nielson
& Co. Inc. and the Lepanto Consolidated Mining Co. whereby the former operated and managed the
mining properties owned by the latter for a management fee of P2,500.00 a month and a 10%
participation in the net profits resulting from the operation of the mining properties, for a period of 5
years. In 1940, a dispute arose regarding the computation of the 10% share of Nielson in the profits. The
Board of Directors of Lepanto, realizing that the mechanics of the contract was unfair to Nielson,
authorized its President to enter into an agreement with Nielson modifying the pertinent provision of the
contract effective 1 January 1940 in such a way that Nielson shall receive (1) 10% of the dividends
declared and paid, when and as paid, during the period of the contract and at the end of each year, (2)
10% of any depletion reserve that may be set up, and (3) 10% of any amount expended during the year
out of surplus earnings for capital account. In the latter part of 1941, the parties agreed to renew the
contract for another period of 5 years, but in the meantime, the Pacific War broke out in December
1941. In January 1942 operation of the mining properties was disrupted on account of the war. In
February 1942, the mill, power plant, supplies on hand, equipment, concentrates on hand and mines,
were destroyed upon orders of the United States Army, to prevent their utilization by the invading
Japanese Army. The Japanese forces thereafter occupied the mining properties, operated the mines
during the continuance of the war, and who were ousted from the mining properties only in August
1945. Shortly after the mines were liberated from the Japanese invaders in 1945, a disagreement arose
between NIELSON and LEPANTO over the status of the operating contract which as renewed expired in
1947.
ISSUE:
Whether or not the management contract is a contract of agency.
RULING:
NO.
In the performance of this principal undertaking Nielson was not in any way executing juridical
acts for Lepanto, destined to create, modify or extinguish business relations between Lepanto and third
persons. In other words, in performing its principal undertaking Nielson was not acting as an agent of
Lepanto, in the sense that the term agent is interpreted under the law of agency, but as one who was
performing material acts for an employer, for a compensation. It is true that the management contract
provides that Nielson would also act as purchasing agent of supplies and enter into contracts regarding
the sale of mineral, but the contract also provides that Nielson could not make any purchase, or sell the
minerals, without the prior approval of Lepanto. It is clear, therefore, that even in these cases Nielson
could not execute juridical acts which would bind Lepanto without first securing the approval of
Lepanto. Nielson, then, was to act only as an intermediary, not as an agent. Further, from the
statements in the annual report for 1936, and from the provision of paragraph XI of the Management
contract, that the employment by Lepanto of Nielson to operate and manage its mines was principally in
consideration of the know-how and technical services that Nielson offered Lepanto. The contract thus
entered into pursuant to the offer made by Nielson and accepted by Lepanto was a "detailed operating
contract". It was not a contract of agency. Nowhere in the record is it shown that Lepanto considered
Nielson as its agent and that Lepanto terminated the management contract because it had lost its trust
and confidence in Nielson.
TRILLANA, petitioner
vs.
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Court Action
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LUMANLAN, plaintiff
vs.
CURA, et al., defendants
G.R. No. L-39861
March 21, 1934
FACTS:
The appellant is a corporation duly organized under the laws of the Philippine Islands with its
central office in the City of Manila. The plaintiff-appellee Bonifacio Lumanlan, on July 31, 1922,
subscribed for 300 shares of stock of said corporation at a par value of P50 or a total of P15,000. Julio
Valenzuela, Pedro Santos and Francisco Escoto, creditors of this corporation, filed suit against it in the
Court of First Instance of Manila, case No. 37007, praying that a receiver be appointed, as it appeared
that the corporation at that time had no assets except credits against those who had subscribed for
shares of stock. The court named Tayag as receiver for the purpose of collecting, said subscriptions. As
Bonifacio Lumanlan had only paid P1,500 of the P15,000, par value of the stock for which he
subscribed, the receiver on August 30, 1930, filed a suit against him in the Court of First Instance of
Manila, civil case No. 37492, for the collection of P15,109, P13,500 of which was the amount he owed for
unpaid stock and P1,609 for loans and advances by the corporation to Lumanlan. In that case
Lumanlan was sentenced to pay the corporation the above-mentioned sum of P15,109 with legal interest
thereon from August 30, 1930, and costs. Lumanlan appealed from this decision.
ISSUE:
Whether or not Bonifacio Lumanlan is entitled to a credit against the judgment in case No. 37492
for P11,840 and an additional sum of P2,000, which is 25 per cent on the principal debt, as he had to
file this suit to collect, or receive credit for the sum which he had paid Valenzuela for and in place of the
corporation, or a total of P13,840.
RULING:
YES.
It appears from the record that during the trial of the case now under consideration, the Bank of
the Philippine Islands appeared in this case as assignee in the "Involuntary Insolvency of Dizon & Co.,
Inc. That bank was appointed assignee in case No. 43065 of the Court of First Instance of the City of
Manila on November 28, 1932. It is therefore evident that there are still other creditors of Dizon & Co.,
Inc. This being the case that corporation has a right to collect all unpaid stock subscriptions and any
other amounts which may be due it.
It is established doctrine that subscriptions to the capital of a corporation constitute a fund to
which the creditors have a right to look for satisfaction of their claims and that the assignee in
insolvency can maintain an action upon any unpaid stock subscription in order to realize assets for the
payment of its debts. The Corporation Law clearly recognizes that a stock subscription is a subsisting
liability from the time the subscription is made, since it requires the subscriber to pay interest quarterly
from that date unless he is relieved from such liability by the by-laws of the corporation. The subscriber
is as much bound to pay the amount of the share subscribed by him as he would be to pay any other
debt, and the right of the company to demand payment is no less incontestable.
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Effect of Delinquency
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or
not
MSCI was
defrauded
by Cheng's
collaboration
with
Mc
Foods.
RULING:
NO.
No evidence on record that the Membership Committee acted on Hodreal's letter. SEC. 29. (a) The
Membership Committee shall process applications for membership; ascertain that the requirements for
stock ownership, including citizenship, are complied with; submit to the Board its recommended on
applicants for inclusion in the Waiting List; take charge of auction sales of shares of stock; and exercise
such other powers and perform such other functions as may be authorized by the Board. Membership
Committee failed to question the alleged irregularities attending Mc Foods purchase price
of P1,800,000.00 is P1,400,000.00 more than the floor price it is not detrimental.
Upon payment and the execution of the Deed of Absolute Sale, it had the right to demand the
delivery of the stock certificate in its name. The right of a transferee to have stocks transferred to its
name is an inherent right flowing from its ownership of the stocks certificate of stock paper
representative or tangible evidence of the stock itself and of the various interests therein not a stock in
the corporation but is merely evidence of the holders interest and status in the corporation, his
ownership of the share represented thereby MSCI failed to repurchase Mc Foods Class "A" share within
the 30 day pre-emptive period and no proof that Cheng personally profited.
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CYRUS PADGETT
vs.
BABCOCK & TEMPLETON, INC., and W. R. BABCOCK
G.R. No. L-38684, December 21, 1933
FACTS:
The appellee was an employee of the Appellant Corporation and rendered services as such from
January 1, 1923, to April 15, 1929. During that period he bought 35 shares thereof at P100 a share at
the suggestion of the president of said corporation. He was also the recipient of 9 shares by way of
bonus during Christmas seasons. In this way the said appellee became the owner of 44 shares for which
the 12 certificates, Exhibits F to F-11, were issued in his favor. The word "nontransferable" appears on
each and every one of these certificates. Before severing his connections with the said corporation, the
appellee proposed to the president that the said corporation buy his 44 shares at par value plus the
interest thereon, or that he be authorized to sell them to other persons. The corporation bought similar
shares belonging to other employees, at par value. Sometime later, the said president offered to buy the
appellee's shares first at P85 each and then at P80. The appellee did not agree thereto.
ISSUE:
Whether or not the defendant obliged to buy his shares of stock at par value.
RULING:
NO.
A restriction imposed upon a certificate of shares, similar to the ones under consideration, is null
and void on the ground that it constitutes and unreasonable limitation of the right of ownership and is
in restraint of trade.
Shares of corporate stock being regarded as property, the owner of such shares may, as a general
rule, dispose of them as he sees fit, unless the corporation has been dissolved, or unless the right to do
so is properly restricted, or the owner's privilege of disposing of his shares has been hampered by his
own action.
Any restriction on a stockholder's right to dispose of his shares must be construed strictly; and
any attempt to restrain a transfer of shares is regarded as being in restraint of trade, in the absence of a
valid lien upon its shares, and except to the extent that valid restrictive regulations and agreements
exist and are applicable. Subject only to such restrictions, a stockholder cannot be controlled in or
restrained from exercising his right to transfer by the corporation or its officers or by other stockholders,
even though the sale is to a competitor of the company, or to an insolvent person, or even though a
controlling interest is sold to one purchaser.
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GLORIA M. DE ERQUIAGA, administratrix of the estate of the late SANTIAGO DE ERQUIAGA &
HON. FELICIANO S. GONZALES
vs.
HON. COURT OF APPEALS, AFRICA VALDEZ VDA. DE REYNOSO, JOSES V. REYNOSO, JR.,
EERNESTO , SYLVIA REYNOSO, LOURDES REYNOSO, CECILE REYNOSO, EDNA REYNOSO,
ERLINDA REYNOSO & EMILY REYNOSO
G.R. No. 47206
September 27, 1989
FACTS:
Santiago de Erquiaga was the owner of 100% or 3,100 paid-up shares of stock of the Erquiaga
Development Corporation which owns the Hacienda San Jose in Irosin, Sorsogon (p. 212, Rollo). He
entered into an Agreement with Jose L. Reynoso to sell to the latter his 3,100 shares (or 100%) of
Erquiaga Development Corporation for P900,000 payable in installments on definite dates fixed in the
contract but not later than November 30, 1968.
Because Reynoso failed to pay the second and third installments on time, the total price of the
sale was later increased to P971,371.70 payable on or before December 17, 1969. The difference of
P71,371.70 represented brokers' commission and interest (CFI Decision, pp. 75, 81, 90, 99,Rollo). As of
December 17, 1968, Reynoso was able to pay the total sum of P410,000 to Erquiaga who thereupon
transferred all his shares (3,100 paid-up shares) in Erquiaga Development Corporation to Reynoso, as
well as the possession of the Hacienda San Jose, the only asset of the corporation However, as provided
in paragraph 3, subparagraph (c) of the contract to sell, Reynoso pledged 1,500 shares in favor of
Erquiaga as security for the balance of his obligation. Reynoso failed to pay the balance of P561,321.70
on or before December 17, 1969, as provided in the promissory notes he delivered to Erquiaga.
ISSUE:
Whether or not the Corporation Code Applicable.
RULING:
YES.
We find no reversible error in the Court of Appeals' decision directing the clerk of court of the trial
court to execute a deed of conveyance to Erquiaga of the 1,600 shares of stock of the Erquiaga
Development Corporation still in Reynoso's name and/or possession, in accordance with the procedure
in Section 10, Rule 39 of the Rules of Court. Neither did it err in annulling the trial court's order: (1)
allowing Erquiaga to vote the 3,100 shares of Erquiaga Development Corporation without having effected
the transfer of those shares in his name in the corporate books; and (2) authorizing Erquiaga to call a
special meeting of the stockholders of the Erquiaga Development Corporation and to vote the 3,100
shares, without the pre-requisite registration of the shares in his name. It is a fundamental rule in
Corporation Law (Section 35) that a stockholder acquires voting rights only when the shares of stock to
be voted are registered in his name in the corporate books.
The order of respondent Court directing Erquiaga to return the sum of P410,000 (or net P348,000
after deducting P62,000 due from Reynoso under the decision) as the price paid by Reynoso for the
shares of stock, with legal rate of interest, and the return by Reynoso of Erquiaga's 3,100 shares with
the fruits(construed to mean not only dividends but also fruits of the corporation's Hacienda San Jose)
is in full accord with Art. 1385 of the Civil Code.
The Hacienda San Jose and 1,500 shares of stock have already been returned to Erquiaga.
Therefore, upon the conveyance to him of the remaining 1,600 shares, Erquiaga (or his heirs) should
return to Reynoso the price of P410,000 which the latter paid for those shares. Pursuant to the
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Inc.
Whether or not petitioner have right over the ownership of the 1,500 shares of stock in E. Razon,
RULING:
NO.
In the instant case, there is no dispute that the questioned 1,500 shares of stock of E. Razon, Inc.
are in the name of the late Juan Chuidian in the books of the corporation. Moreover, the records show
that during his lifetime Chuidian was ellected member of the Board of Directors of the corporation which
clearly shows that he was a stockholder of the corporation. From the point of view of the corporation,
therefore, Chuidian was the owner of the 1,500 shares of stock. In such a case, the petitioner who
claims ownership over the questioned shares of stock must show that the same were transferred to him
by proving that all the requirements for the effective transfer of shares of stock in accordance with the
corporation's by laws, if any, were followed or in accordance with the provisions of law.
The petitioner failed in both instances. The petitioner did not present any by-laws which could
show that the 1,500 shares of stock were effectively transferred to him. In the absence of the
corporation's by-laws or rules governing effective transfer of shares of stock, the provisions of the
Corporation Law are made applicable to the instant case.
The law is clear that in order for a transfer of stock certificate to be effective, the certificate must
be properly indorsed and that title to such certificate of stock is vested in the transferee by the delivery
of the duly indorsed certificate of stock. Since the certificate of stock covering the questioned 1,500
shares of stock registered in the name of the late Juan Chuidian was never indorsed to the petitioner,
the inevitable conclusion is that the questioned shares of stock belong to Chuidian. The petitioner's
asseveration that he did not require an indorsement of the certificate of stock in view of his intimate
friendship with the late Juan Chuidian can not overcome the failure to follow the procedure required by
law or the proper conduct of business even among friends. To reiterate, indorsement of the certificate of
stock is a mandatory.
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RULING:
YES.
It has already been settled that an intracorporate controversy would call for the jurisdiction of the
Securities and Exchange Commission. On the other hand, an intra-corporate controversy has been
defined as "one which arises between a stockholder and the corporate. There is no distinction,
qualification, nor any exemption whatsoever."
This Court has also ruled that cases of private respondents who are not shareholders of the
corporation, cannot be a "controversy arising out of intracorporate or partnership relations between and
among stockholders, members or associates; between any or all of them and the corporation,
partnership or association, of which they are stockholders, members or associates, respectively."
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The defendant (a non-stock corporation) issued to Iwao Teruyama Membership Certificate No. 201
which was assigned to M. T. Reyes on April 22, 1944. Subsequently in the same year 1944, M. T. Reyes
transferred and assigned said certificate to the plaintiff. On April 26, 1955, the plaintiff filed an action
in the Court of First Instance of Manila against the defendant, alleging that shortly after the
rehabilitation of the defendant after the war, the plaintiff asked the defendant to register in its books the
assignment in favor of the plaintiff and to issue to the latter a new certificate, but that the defendant
had refused and still refuses to do so unlawfully; and praying that the plaintiff be declared the owner of
one share of stock of the defendant and that the latter be ordered to issue a correspondent new
certificate. On June 6, 1955, the defendant filed a motion to dismiss, alleging that from 1944, when the
plaintiff's right of action had accrued, to April 26, 1955, when the complaint was filed, eleven years have
elapsed, and that therefore the complaint was filed beyond the 5-year period fixed in Article 1149 of the
Civil Code. On July 30, 1955, the Court of First Instance of Manila issued an order dismissing the
complaint. As plaintiff's motion for reconsideration filed on August 27, 1955 and second motion for
reconsideration filed on September 13, 1955, were both denied, the plaintiff has taken the present
appeal.
Issue:
Whether or not the plaintiff is entitled to the registration of the transferred share of stock.
RULING:
NO.
The certificate in question contains a condition to the effect that no assignment thereof "shall be
effective with respect to the club until such assignment is registered in the books of the club, as
provided in the By-Laws." The decisive question that arises is whether the plaintiff was bound, under
said condition and By-Laws of the defendant or any statutory rule for that matter, to present and
register the certificate assigned to him in 1944 within any definite or fixed period. The defendant has not
made herein any pretense to that effect; but it contends that from the moment the certificate was
assigned to the plaintiff, the latter's right to have the assignment registered commenced to exist. This
contention is correct, but it would not follow that said right should be exercised immediately or within a
definite period. The existence of a right is one thing, and the duration of said right is another.
On the other hand, it is stated in the appealed order of dismissal that the plaintiff sought to
register the assignment on April 13, 1955; whereas in plaintiff's brief it is alleged that it was only in
February, 1955, when the defendant refused to recognize the plaintiff. If, as already observed, there is
no fixed period for registering an assignment, how can the complaint be considered as already barred by
the Statute of Limitations when it was filed on April 26, 1955, or barely a few days (according to the
lower court) and two months (according to the plaintiff), after the demand for registration and its denial
by the defendant. Plaintiff's right was violated only sometime in 1955, and it could not accordingly have
asserted any cause of action against the defendant before that.
FACTS:
Richard Huenefeld, is a stockholder of petitioner Philex Mining Corporation. He originally owned
800,000 shares of stock. On February 6, 1980, First Asian wrote Huenefeld informing him that the stock
certificate had been delivered to him at his address at Michelle Apartment, 2030 A. Mabini Street,
Manila; and that if the certificate could not be located that Huenefeld execute an Affidavit of Loss, with
the notice of loss to be published once a week for three (3) consecutive weeks in a newspaper of general
circulation in accordance with the procedure prescribed BY Republic Act No. 201.
Huenefeld, through counsel, replied that RA 201 is not applicable because the stock certificate
was not lost in the possession of the stockholder; that assuming it was, the expenses of publication and
premiums for the bond should be at Philex's expense; and demanded the issuance of a replacement
stock certificate. Huenefeld also submitted an Affidavit of Loss but did not comply with the other
requirements on publication.
ISSUE:
Whether or not the Court of First Instance hasve jurisdiction over the present controversy, which
Philex contends is an intra-corporate one.
RULING:
NO.
Evident from the foregoing is that an intra-corporate controversy is one which arises between a
stockholder and the corporation. There is no distinction, qualification, nor any exemption whatsoever.
The provision is broad and covers all kinds of controversies between stockholders and corporations. The
issue of whether or not a corporation is bound to replace a stockholder's lost certificate of stock is a
matter purely between a stockholder and the corporation. It is a typical intra-corporate dispute. The
question of damages raised is merely incidental to that main issue.
Section 5 of Presidential Decree No. 902-A provides: In addition to the regulatory and adjudicative
functions of the Securities and Exchange Commission over corporations, partnerships and other forms
of associations registered with it as expressly granted under existing laws and decrees; it shall have
original and exclusive jurisdiction to hear and decide cases involving: Controversies arising out of intracorporate or partnership relations, between and among stockholders, members, or associates; between
any or all of them and the corporation, partnership or association of which they are stockholders,
members, or associates, respectively and between such corporation, partnership or association and the
state insofar as it concerns their individual franchise or right to exist as such entity.
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VICTOR AFRICA
vs.
PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, JOSE LAURETA, MELQUIADES
GUTIERREZ, EDUARDO M. VILLANUEVA, EDUARDO DE LOS ANGELES and ROMAN MABANTA, JR.
348 | P a g e
January 9, 1992
FACTS:
Victor Africa, who claims to be an employee of ETPI holding the positions of vice-president,
general counsel (on official leave without pay), corporate secretary and special assistant to the chairman
(and president), filed directly with this Court on June 30, 1988 a petition for injunction docketed as G.R.
No. 83831, seeking to enjoin the PCGG and its nominees/designees to the board of directors and the
newly-installed officers of ETPI from implementing their alleged illegal, invalid and immoral act of
ousting him from his offices and positions at the ETPI pending the determination of whether they have
validly, legally and morally assumed their supposed positions and offices as "directors" and/or "officers"
of ETPI.
He contends that the reasons advanced by the PCGG-sponsored board of directors for ousting
him from his offices (redundancy, need to conserve company funds and loss of confidence) are flimsy,
whimsical and arbitrary, evidencing not only the PCGG-sponsored board's discriminatory and
oppressive attitude towards him but, more importantly, its clear intent to harass him into refraining
from questioning before several tribunals all the invalid, illegal and immoral acts of said PCGGsponsored board which have caused and are still causing ETPI damages because they constitute
dissipation of assets.
ISSUE:
Whether or not the acts and orders of the PCGG which led to the nomination and election of the
new members of the board of directors and officers of the ETPI correct.
RULING:
YES.
In upholding therein the right of a stockholder of a sequestered company to inspect and/or
examine the records of a corporation pursuant to Section 74 of the Corporation Code, the Court found
nothing in Executive Orders Nos. 1, 2 and 14, as well as in BASECO, to indicate an implied amendment
of the Corporation Code, much less an implied modification of a stockholder's right of inspection as
guaranteed by Section 74 thereof. The only express limitation on the right of inspection, according to the
Court, is that (1) the right of inspection should be exercised at reasonable hours on business days; (2)
the person demanding the right to examine and copy excerpts from the corporate records and minutes
has not improperly used any information secured through any previous examination of the records of
such corporation; and (3) the demand is made in good faith or for a legitimate purpose.
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RULING:
NO.
In legal parlance, however, human beings are never embraced in the term "assets and liabilities."
Moreover, BPIs absorption of former FEBTC employees was neither by operation of law nor by legal
consequence of contract. There was no government regulation or law that compelled the merger of the
two banks or the absorption of the employees of the dissolved corporation by the surviving corporation.
Had there been such law or regulation, the absorption of employees of the non-surviving entities of the
merger would have been mandatory on the surviving corporation. In the present case, the merger was
voluntarily entered into by both banks presumably for some mutually acceptable consideration. In fact,
the Corporation Code does not also mandate the absorption of the employees of the non-surviving
corporation by the surviving corporation in the case of a merger.
Significantly, too, the Articles of Merger and Plan of Merger dated April 7, 2000 did not contain
any specific stipulation with respect to the employment contracts of existing personnel of the nonsurviving entity which is FEBTC. Unlike the Voluntary Arbitrator, this Court cannot uphold the
reasoning that the general stipulation regarding transfer of FEBTC assets and liabilities to BPI as set
forth in the Articles of Merger necessarily includes the transfer of all FEBTC employees into the employ
of BPI and neither BPI nor the FEBTC employees allegedly could do anything about it. Even if it is so, it
does not follow that the absorbed employees should not be subject to the terms and conditions of
employment obtaining in the surviving corporation.
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FACTS:
Norton and Harrison is a corporation organized in 1911, (1) to buy and sell at wholesale and
retail, all kinds of goods, wares, and merchandise; (2) to act as agents of manufacturers in the United
States and foreign countries; and (3) to carry on and conduct a general wholesale and retail mercantile
establishment in the Philippines. Jackbilt is, likewise, a corporation organized on February 16, 1948
primarily for the purpose of making, producing and manufacturing concrete blocks. Under date of July
27, 1948. Norton and Jackbilt entered into an agreement whereby Norton was made the sole and
exclusive distributor of concrete blocks manufactured by Jackbilt. Pursuant to this agreement, whenever
an order for concrete blocks was received by the Norton & Harrison Co. from a customer, the order was
transmitted to Jackbilt which delivered the merchandise direct to the customer. Payment for the goods
is, however, made to Norton, which in turn pays Jackbilt the amount charged the customer less a
certain amount, as its compensation or profit. To exemplify the sales procedures adopted by the Norton
and Jackbilt, the following may be cited. In the case of the sale of 420 pieces of concrete blocks to the
American Builders on April 1, 1952, the purchaser paid to Norton the sum of P189.00 the purchase
price. Out of this amount Norton paid Jackbilt P168.00, the difference obviously being its
compensation. As per records of Jackbilt, the transaction was considered a sale to Norton. It was under
this procedure that the sale of concrete blocks manufactured by Jackbilt was conducted until May 1,
1953, when the agency agreement was terminated and a management agreement between the parties
was entered into.
ISSUE:
Whether or not the acquisition of all the stocks of the Jackbilt by the Norton & Harrison Co.,
merged the two corporations into a single corporation.
RULING:
YES.
It has been settled that the ownership of all the stocks of a corporation by another corporation
does not necessarily breed an identity of corporate interest between the two companies and be
considered as a sufficient ground for disregarding the distinct personalities. However, in the case at bar,
we find sufficient grounds to support the theory that the separate identities of the two companies
should be disregarded. There was no limit to the advances given to Jackbilt. The income tax return of
Norton for 1954 shows that as President and Treasurer of Norton and Jackbilt, he received from Norton
P56,929.95, but received from Jackbilt the measly amount of P150.00, a circumstance which points out
that remuneration of purported officials of Jackbilt are deemed included in the salaries they received
from Norton. The same is true in the case of Eduardo Garcia, an employee of Norton but a member of
the Board of Jackbilt. His Income tax return for 1956 reveals that he received from Norton in salaries
and bonuses P4,220.00, but received from Jackbilt, by way of entertainment, representation, travelling
and transportation allowances P3,000.00. However, in the withholding statement, it was shown that the
total of P4,200.00 and P3,000.00 was received by Garcia from Norton, thus portraying the oneness of
the two companies. The Income Tax Returns of Albert Golden and Dioscoro Ramos both employees of
Norton but board members of Jackbilt, also disclose the game method of payment of compensation and
allowances. The offices of Norton and Jackbilt are located in the same compound. Payments were
effected by Norton of accounts for Jackbilt and vice versa. Payments were also made to Norton of
accounts due or payable to Jackbilt and vice versa.
COMMISSIONER OF INTERNAL REVENUE
vs.
VICENTE A. RUFINO, ET AL.
361 | P a g e
FACTS:
The private respondents were the majority stockholders of the Eastern Theatrical Co., Inc., a
corporation organized for a period of twenty-five years terminating in 1959. It was organized to engage in
the business of operating theaters, opera houses, places of amusement and other related business
enterprises, more particularly the Lyric and Capitol Theaters in Manila. The President of this
corporation during the year in question was Ernesto D. Rufino.
The private respondents are also the majority and controlling stockholders of another
corporation, the Eastern Theatrical Co Inc., which was organized in 1958, for a term of 50 years. This
corporation is engaged in the same kind of business as the Old Corporation. The General-Manager of
this corporation (hereinafter referred to as the New Corporation) at the time was Vicente A. Rufino.
In a special meeting of stockholders of the Old Corporation it provided for the continuation of its
business after the end of its corporate life, and upon the recommendation of its board of directors, a
resolution was passed authorizing the Old Corporation to merge with the New Corporation by
transferring its business, assets, goodwill, and liabilities to the latter, which in exchange would issue
and distribute to the shareholders of the Old Corporation one share for each share held by them in the
said Corporation.
It was expressly declared that the merger of the Old Corporation with the New Corporation was
necessary to continue the exhibition of moving pictures at the Lyric and Capitol Theaters even after the
expiration of the corporate existence of the former.
ISSUE:
Whether or not the merger of the two corporations is valid.
RULING:
YES.
The term "merger" or "consolidation," shall be understood to mean: (1) The ordinary merger or
consolidation, or (2) the acquisition by one corporation of all or substantially all the properties of
another corporation solely for stock, provided, that for a transaction to be regarded as a merger or
consolidation, it must be undertaken for a bona fide business purpose and not solely for the purpose of
escaping the burden of taxation, provided further, that in determining whether a bona fide business
purpose exists, each and every step of the transaction shall be considered and the whole transaction or
series of transactions shall be treated as a single unit.
No taxable gain was derived by the private respondents from the questioned transaction.
Contrary to the claim of the petitioner, there was a valid merger although the actual transfer of the
properties subject of the Deed of Assignment was not made on the date of the merger. In the nature of
things, this was not possible. Obviously, it was necessary for the Old Corporation to surrender its net
assets first to the New Corporation before the latter could issue its own stock to the shareholders of the
Old Corporation because the New Corporation had to increase its capitalization for this purpose.
There is no impediment to the exchange of property for stock between the two corporations being
considered to have been effected on the date of the merger. That, in fact, was the intention, and the
reason why the Deed of Assignment was made retroactive to January 1, 1959. Such retroaction provided
in effect that all transactions set forth in the merger agreement shall be deemed to be taking place
simultaneously on January 1, 1959, when the Deed of Assignment became operative.
SOLID MANILA CORPORATION
vs.
BIO HONG TRADING., INC. AND COURT OF APPEALS
362 | P a g e
APRIL 8, 1991
FACTS:
The petitioner is the owner of a parcel of land. The same lies in the vicinity of another parcel,
registered in the name of the private respondent corporation. The private respondent's title came from a
prior owner, and in their deed of sale, the parties thereto reserved as an easement of way. As a
consequence, an annotation was entered in the private respondent's title.
The petitioner claims that ever since, it had (as well as other residents of neighboring estates)
made use of the above private alley and maintained and contributed to its upkeep, until sometime in
1983, when, and over its protests, the private respondent constructed steel gates that precluded
unhampered use. On December 6, 1984, the petitioner commenced suit for injunction against the
private respondent, to have the gates removed and to allow full access to the easement.
ISSUE:
Whether or not the court a quo errs in holding that an easement had been extinguished by
merger.
RULING:
NO.
There is no question that an easement, as described in the deed of sale executed between the
private respondent and the seller, had been constituted on the private respondent's property, and has
been annotated. Specifically, the same charged the private respondent as follows, that the alley shall
remain open at all times, and no obstructions whatsoever shall be placed thereon, that the owner of the
lot on which the alley has been constructed shall allow the public to use the same, and allow the City to
lay pipes for sewer and drainage purposes, and shall not ask for any indemnity for the use thereof. Its
act, therefore, of erecting steel gates across the alley was in defiance of these conditions and a violation
of the deed of sale, and, of course, the servitude of way.
No genuine merger took place as a consequence of the sale in favor of the private respondent
corporation. According to the Civil Code, a merger exists when ownership of the dominant and servient
estates is consolidated in the same person. Merger then, as can be seen, requires full ownership of both
estates.
However, the servitude in question is a personal servitude, that is to say, one constituted not in
favor of a particular tenement (a real servitude) but rather, for the benefit of the general public. In a
personal servitude, there is therefore no "owner of a dominant tenement" to speak of, and the easement
pertains to persons without a dominant estate, in this case, the public at large.
Merger presupposes the existence of a prior servient-dominant owner relationship, and the
termination of that relation leaves the easement of no use. Unless the owner conveys the property in
favor of the public, if that is possible, hence, no genuine merger can take place that would terminate a
personal easement. In the case at bar, the defense of merger is, clearly, not a valid defense, indeed, a
sham one, because merger is not possible, and secondly, the sale unequivocally preserved the existing
easement. In other words, the answer does not, in reality, tender any genuine issue on a material fact
and cannot militate against the petitioner's clear cause of action.
NON-STOCK CORPORATIONS
Purposes
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Voting
ANTONIO LITONJUA and ARNOLD LITONJUA
vs.
THE HON. COURT OF APPEALS, ET. AL.
G.R. No. 120294
February 10, 1998
FACTS:
Wack Wack Golf and Country Club is a non-profit corporation which offers sports, recreational
and social activities to its members. Petitioner Antonio Litonjua is an Associate Member of said
corporation and his son, co-petitioner Arnold Litonjua, is a Junior Member thereof. The individual
respondents are the members of the Board of Directors and Membership Committee of Wack Wack. On
10 January 1985, pursuant to its by-laws, respondent club posted the monthly list of delinquent
members on its premises. Included therein was petitioner Antonio Litonjua.
After Antonio Litonjua discovered that his name was on the January 1985 delinquent list, he
proceeded to the Cashier's Office of the club and was informed therein that the reason behind his
delinquency was his failure to pay his November 1984 dues (which should have been paid before the end
of December 1984 as provided in the corporate by-laws). Antonio Litonjua alleged that he was not able to
pay his monthly bill on time because he has not received his statement of account for November 1984.
As proof, he presented a sealed envelope which he allegedly presumed to be the November 1984 bill (but
was actually the December 1984 statement of account) and explained that he received it only on 12
January 1985.
A check with the accounting office, however, revealed that the November 1984 statement of
account had already been delivered to Antonio Litonjua's office and was received by his employee
allegedly named "Aquino." Petitioner asserted that, he did not receive said account and had no employee
by the name of "Aquino." Based on the foregoing, Antonio Litonjua was able to convince the auxiliary
clerks in the Cashier's Office to delete his name from the list of delinquent members. Consequently,
Antonio Litonjua continued to avail of the club facilities. Later, Antonio Litonjua was advised of another
outstanding balance in the amount of P9,414.00. Again, he issued a check in payment thereof. As a
result, his name was deleted from the February 1985 list of delinquent members.
ISSUE:
Whether or not the statement of account for November 1984 was duly delivered to and received by
Antonio Litonjua's office on 12 December 1984.
RULING:
NO.
According to Mr. Limbo's testimony on record, the Court failed to find therein any statement that
he delivered the November 1984 account to Antonio Litonjua himself. Mr. Limbo was consistent in his
testimony to the effect that on 12 December 1984 he delivered the November 1984 statement of account
at the office of Antonio Litonjua and it was received by an employee of the latter who signed the Special
Delivery Receipt. On cross-examination, Mr. Limbo did not waver from his testimony that Antonio
Litonjua's November 1984 bill was duly received by the latter's employee.Against the testimony of Mr.
Victor Limbo, coupled with documentary evidence in the form of the signed Special Delivery Receipt,
petitioners presented no proof other than the bare denial of Antonio Litonjua that he never received his
statement of account for November 1984 and that he has no "Aquino" in his employ. Petitioners could
have readily offered in evidence a record or list of Antonio Litonjua's employees to prove that he has no
employee by the name of "Aquino" but, strangely, beyond his mere say-so no such evidence was adduced.
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CLOSE CORPORATIONS
Requirements for Formation
MANUEL R. DULAY ENTERPRISES, INC
vs.
THE HONORABLE COURT OF APPEALS
G.R. No. 91889
August 27, 1993
FACTS:
Manuel R. Dulay Enterprises, Inc, a domestic corporation with the following as members of its
Board of Directors: Manuel R. Dulay with 19,960 shares and designated as president, treasurer and
general manager, Atty. Virgilio E. Dulay with 10 shares and designated as vice-president; Linda E. Dulay
with 10 shares; Celia Dulay-Mendoza with 10 shares; and Atty. Plaridel C. Jose with 10 shares and
designated as secretary, owned a property covered by TCT No. 17880 and known as Dulay Apartment
consisting of sixteen (16) apartment units on a six hundred eighty-nine (689) square meters lot, more or
less, located at Seventh Street (now Buendia Extension) and F.B. Harrison Street, Pasay City.
Petitioner corporation through its president, Manuel Dulay, obtained various loans for the
construction of its hotel project, Dulay Continental Hotel (now Frederick Hotel). It even had to borrow
money from petitioner Virgilio Dulay to be able to continue the hotel project. As a result of said loan,
petitioner Virgilio Dulay occupied one of the unit apartments of the subject property since property since
1973 while at the same time managing the Dulay Apartment at his shareholdings in the corporation was
subsequently increased by his father.
Manuel Dulay by virtue of Board Resolution petitioner corporation sold the subject property to
private respondents spouses Maria Theresa and Castrense Veloso in the amount of P300,000.00 as
evidenced by the Deed of Absolute Sale.Subsequently, private respondent Maria Veloso, without the
knowledge of Manuel Dulay, mortgaged the subject property to private respondent Manuel A. Torres for a
loan of P250,000.00 which was duly annotated.Upon the failure of private respondent Maria Veloso to
pay private respondent Torres, the subject property was sold on April 5, 1978 to private respondent
Torres as the highest bidder in an extrajudicial foreclosure sale as evidenced by the Certificate of
Sheriff's Sale issued on April 20, 1978.
ISSUE:
Whether or not the doctrine of piercing the veil of corporate entity is applicable.
RULING:
NO.
Petitioner Corporation is classified as a close corporation and consequently a board resolution
authorizing the sale or mortgage of the subject property is not necessary to bind the corporation for the
action of its president. At any rate, corporate action taken at a board meeting without proper call or
notice in a close corporation is deemed ratified by the absent director unless the latter promptly files his
written objection with the secretary of the corporation after having knowledge of the meeting which, in
his case, petitioner Virgilio Dulay failed to do.
It is relevant to note that although a corporation is an entity which has a personality distinct and
separate from its individual stockholders or members,the veil of corporate fiction may be pierced when it
is used to defeat public convenience justify wrong, protect fraud or defend crime. The privilege of being
treated as an entity distinct and separate from its stockholder or members is therefore confined to its
legitimate uses and is subject to certain limitations to prevent the commission of fraud or other illegal or
unfair act. When the corporation is used merely as an alter ego or business conduit of a person, the law
will regard the corporation as the act of that person.
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SPECIAL CORPORATIONS
Art. IV, Sec. 28 (3) and Art. 29 (2), 1987 Constitution
REPUBLIC OF THE PHILIPPINES
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT
G.R. No. L-68303
January 15, 1988
FACTS:
The properties in dispute number three undivided lots and Lot No. 2410-B, Psd-864 (Lot 2461
Cad 99)] altogether consisting of a total of 1,024 hectares of ricelands. They are all located in Tiptipon,
Panamao, Sulu. The title thereto stood allegedly in the name of Sultan Jamalul Kiram, who died in
1936. The private respondent, a niece of the late Sultan, now claims that the original certificate of title
thereto was destroyed as a consequence of a fire that gutted the office of the Register of Deeds of Sulu
sometime in February, 1974. She likewise alleges that the owner's copy thereof was lost on account of
the same misfortune. On October 18,1979, she went to the then Court of First Instance of Sulu, Branch
I, at Jolo, now Regional Trial Court, the Honorable Jainal D. Rasul, District Judge, presiding, for
reconstitution.
The Solicitor General presented in the trial court no opposition to the application, and based on
the evidence of the private respondent, the assailed order was issued on June 4, 1980. The Solicitor
General appealed to the then Intermediate Appellate Court, now Court of Appeals, which however
affirmed in toto, on May 24, 1984, the order of the trial court.
ISSUE:
Whether or not the Petition be granted.
RULING:
YES.
It is not disputed, to begin with, that the notices (of hearing) were not posted on the main
entrances of the provincial and municipal halls of the locality in which the lands are located. Under
Section 13, of Republic Act No. 26: The court shall cause a notice of the petition, filed under the
preceding section, to be published, at the expense of the petitioner, twice issues of the Official Gazette,
and to be posted on the main of the municipality or city in which the land is situated, at the provincial
building and of the municipal building at least thirty days prior to the date of hearing. The court shall
likewise cause a copy of the notice to be sent, by registered mail or otherwise, at the expense of the
petitioner, to every person named therein whose address is known, at least thirty days prior to the date
of hearing. Said notice shall state, among other things, the number of the lost or destroyed certificate of
title, if known, the name of the registered owner, the names of the occupants or persons in possession of
the property, the owners of the adjoining properties and all other interested parties, the location, area
and boundaries of the property, and the date on which all persons having any interest therein must
appear and file their claim or objections to the petition. The petitioner shall, at the hearing, submit proof
of the publication, posting and service of the notice as directed by the court.
We have held that such a mode of publication is a jurisdictional requirement. The failure on the
part of the applicant to comply with it confers no jurisdiction upon the court. Neither is there any
showing that the adjacent owners or other interested parties were actually notified of the pending
application. This too taints the petition with a jurisdictional defect. It is not enough that there is
publication in the Official Gazette. Publication of the notice in the Official. The Republic cannot be
faulted for nursing doubts about the private respondent's assertions. In the first place, the private
respondent claims that two deeds have been lost.
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Corporation Aggregate
IGLESIA EVANGELICA METODISTA EN LAS ISLAS FILIPINAS (IEMELIF) (Corporation Sole), INC.,
et al
vs.
BISHOP NATHANAEL LAZARO, et al
G.R. No. 184088 July 6, 2010
FACTS:
Bishop Nicolas Zamora established the petitioner Iglesia Evangelica Metodista En Las Islas
Filipinas, Inc. (IEMELIF) as a corporation sole with Bishop Zamora acting as its "General
Superintendent." Thirty-nine years later in 1948, the IEMELIF enacted and registered a by-laws that
established a Supreme Consistory of Elders (the Consistory), made up of church ministers, who were to
serve for four years. The by-laws empowered the Consistory to elect a General Superintendent, a General
Secretary, a General Evangelist, and a Treasurer General who would manage the affairs of the
organization. For all intents and purposes, the Consistory served as the IEMELIFs board of directors.
Apparently, although the IEMELIF remained a corporation sole on paper (with all corporate
powers theoretically lodged in the hands of one member, the General Superintendent), it had always
acted like a corporation aggregate. The Consistory exercised IEMELIFs decision-making powers without
ever being challenged. Subsequently, during its 1973 General Conference, the general membership voted
to put things right by changing IEMELIFs organizational structure from a corporation sole to a
corporation aggregate. On May 7, 1973 the Securities and Exchange Commission (SEC) approved the
vote. For some reasons, however, the corporate papers of the IEMELIF remained unaltered as a
corporation sole. Only in 2001, about 28 years later, did the issue reemerge. In answer to a query from
the IEMELIF, the SEC replied on April 3, 2001 that, although the SEC Commissioner did not in 1948
object to the conversion of the IEMELIF into a corporation aggregate, that conversion was not properly
carried out and documented.
ISSUE:
Whether or not a corporation sole be converted into a corporation aggregate by mere amendment
of its articles of incorporation.
RULING:
YES.
The Corporation Code provides no specific mechanism for amending the articles of incorporation
of a corporation sole. But, as the RTC correctly held, Section 109 of the Corporation Code allows the
application to religious corporations of the general provisions governing non-stock corporations.
Although a non-stock corporation has a personality that is distinct from those of its members
who established it, its articles of incorporation cannot be amended solely through the action of its board
of trustees. The amendment needs the concurrence of at least two-thirds of its membership. If such
approval mechanism is made to operate in a corporation sole, its one member in whom all the powers of
the corporation technically belongs, needs to get the concurrence of two-thirds of its membership. The
one member, here the General Superintendent, is but a trustee, according to Section 110 of the
Corporation Code, of its membership. There is no point to dissolving the corporation sole of one member
to enable the corporation aggregate to emerge from it. Whether it is a non-stock corporation or a
corporation sole, the corporate being remains distinct from its members, whatever be their number. The
increase in the number of its corporate membership does not change the complexion of its corporate
373 | P a g e
RULING:
YES.
Juane maintains that the "IEMELIF" that filed the Complaint before the MeTC had no personality
to eject him from the subject property. The Church has remained a corporation sole, since its
transformation to a corporation aggregate was legally defective. Juane, thus, claims that he is now the
corporation sole, who is entitled to the physical possession of the subject property as owner thereof. In
fact, on the basis of these same arguments.
Even if the transformation of IEMELIF from a corporation sole to a corporation aggregate was
legally defective, its head or governing body, i.e., Bishop Lazaro, whose acts were approved by the
Highest Consistory of Elders, still did not change. A corporation sole is one formed by the chief
archbishop, bishop, priest, minister, rabbi or other presiding elder of a religious denomination, sect, or
church, for the purpose of administering or managing, as trustee, the affairs, properties and
temporalities of such religious denomination, sect or church. As opposed to a corporation aggregate, a
corporation sole consists of a single member, while a corporation aggregate consists of two or more
persons. If the transformation did not materialize, the corporation sole would still be Bishop Lazaro, who
himself performed the questioned acts of removing Juane as Resident Pastor of the Tondo Congregation.
If the transformation did materialize, the corporation aggregate would be composed of the Highest
Consistory of Elders, which nevertheless approved the very same acts. As either Bishop Lazaro or the
Highest Consistory of Elders had the authority to appoint Juane as Resident Pastor of the IEMELIF
Tondo Congregation, it also had the power to remove him as such or transfer him to another
congregation.
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DISSOLUTION OF CORPORATIONS
Where Creditors are Not Affected
TEODORO B. VESAGAS, AND WILFRED D. ASIS
vs.
THE HONORABLE COURT OF APPEALS
G.R. NO. 142924
DECEMBER 5, 2001
FACTS:
The respondent spouses Delfino and Helenda Raniel are members in good standing of the Luz
Villaga Tennis Clud, Inc. (club). They alleged that petitioner Teodoro B. Vesagas, who claims to be the
club's duly elected president, in conspiracy with petitioner Wilfred D. Asis, who, in turn, claims to be its
duly elected vice-president and legal counsel, summarily stripped them of their lawful membership,
without due process of law. Thereafter, respondent spouses filed a Complaint with the Securities and
Exchange Commission (SEC) on March 26, 1997 against the petitioners. It was docketed as SEC Case
No. 03-97-5598.In this case, respondents asked the Commission to declare as illegal their expulsion
from the club as it was allegedly done in utter disregard of the provisions of its by-laws as well as the
requirements of due process. They likewise sought the annulment of the amendments to the by-laws
made on December 8, 1996, changing the annual meeting of the club from the last Sunday of January
to November and increasing the number of trustees from nine to fifteen. Finally, they prayed for the
issuance of a Temporary Restraining Order and Writ of Preliminary Injunction. The application for TRO
was denied by SEC Hearing Officer Soller in an Order dated April 29, 1997.
ISSUE:
Whether or not SEC has jurisdiction.
RULING:
YES.
Petitioners' attempt to impress upon this court that the club has never been a corporation is
devoid of merit. It must fail in the face of the Commission's explicit finding that the club was duly
registered and a certificate of incorporation was issued in its favor. It ought to be remembered that the
question of whether the club was indeed registered and issued a certification or not is one which
necessitates a factual inquiry. On this score, the finding of the Commission, as the administrative
agency tasked with among others the function of registering and administering corporations, is given
great weight and accorded high respect. We therefore have no reason to disturb this factual finding
relating to the club's registration and incorporation.
Moreover, by their own admission contained in the various pleadings which they have filed in the
different stages of this case, petitioners themselves have considered the club as a corporation. This
admission, under the rules of evidence, binds them and may be taken or used against them. Since the
admission was made in the course of the proceedings in the same case, it does not require proof, and
actually may be contradicted only by showing that it was made through palpable mistake or that no
such admission was made.
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Involuntary
PHILIPPINE NATIONAL BANK
vs.
CIF OF RIZAL
G.R. NO. 63201
MAY 27, 1992
FACTS:
On March 1, 1954, private respondents entered into a contract of lease with Philippine Blooming
Mills, Co., Inc., (PBM for brevity) whereby the letter shall lease the aforementioned parcels of land as
factory site. PBM was duly organized and incorporated on January 19, 1952 with a corporate term of
twenty-five (25) years. This leasehold right of PBM covering the parcels of land was duly annotated at the
back of the above stated certificates of title as Entry No. 9367/T-No. 32843. The contract of lease
provides that the term of the lease is for twenty years beginning from the date of the contract and "is
extendable for another term of twenty years at the option of the LESSEE should its term of existence be
extended in accordance with law."
On October 11, 1963, PBM executed in favor of Philippine National Bank (PNB for brevity),
petitioner herein, a deed of assignment, conveying and transferring all its rights and interests under the
contract of lease which it executed with private respondents. The assignment was for and in
consideration of the loans granted by PNB to PBM. The deed of assignment was registered and
annotated at the back of the private respondents' certificates of title as Entry No. 85215/T-No. 32843.
ISSUE:
Whether or not the cancellation of the entries on respondent's certificates of title valid and proper.
RULING:
YES.
The contract of lease expressly provides that the term of the lease shall be twenty years from the
execution of the contract but can be extended for another period of twenty years at the option of the
lessee should the corporate term be extended in accordance with law. Clearly, the option of the lessee to
extend the lease for another period of twenty years can be exercised only if the lessee as corporation
renews or extends its corporate term of existence in accordance with the Corporation Code which is the
applicable law. Thus, in the instant case, the initial term of the contract of lease which commenced on
March 1, 1954 ended on March 1, 1974. PBM as lessee continued to occupy the leased premises beyond
that date with the acquiescence and consent of the respondents as lessor. Records show however, that
PBM as a corporation had a corporate life of only twenty-five (25) years which ended an January 19,
1977. It should be noted however that PBM allowed its corporate term to expire without complying with
the requirements provided by law for the extension of its corporate term of existence.
There is no need for the institution of a proceeding for quo warranto to determine the time or date
of the dissolution of a corporation because the period of corporate existence is provided in the articles of
incorporation. When such period expires and without any extension having been made pursuant to law,
the corporation is dissolved automatically insofar as the continuation of its business is concerned.
Considering the foregoing in relation to the contract of lease between the parties herein, when
PBM's corporate life ended on January 19, 1977 and its 3-year period for winding up and liquidation
378 | P a g e
Liquidation: Methods
METROPOLITAN BANK and TRUST COMPANY
vs.
CENTRO DEVELOPMENT CORPORATION, CHONGKING KEHYENG, MANUEL CO KEHYENG and
Quirino Kehyeng
G.R. No. 180974
June 13, 2012
FACTS:
On March 20, 1990, in a special meeting of the board of directors of respondent Centro
Development Corporation, its president Go Eng Uy was authorized to mortgage its properties and assets
to secure the medium-term loan of P 84 million of Lucky Two Corporation and Lucky Two Repacking.
The properties and assets consisted of a parcel of land with a building and improvements located at
Salcedo St., Legaspi Village, Makati City, and covered by Transfer Certificate of Title Nos. 139880 and
139881. This authorization was subsequently approved on the same day by the stockholders. Maria
Jacinta V. Go, the corporate secretary, issued a Secretarys Certificate.
San Carlos failed to pay these outstanding obligations despite demand. Thus, petitioner, as
trustee of the MTI, enforced the conditions thereof and initiated foreclosure proceedings, denominated as
Foreclosure No. S-04-11, on the mortgaged properties.
ISSUE:
Whether or not the petitioner, as creditor or as trustee, had a cause of action to move for the
extrajudicial foreclosure of the subject properties mortgaged under the MTI.
RULING:
NO.
It is the intent of the COMPANY that the BORROWERS will obtain additional loans or credit
accommodations from certain other banking or financial institutions in accordance with arrangements
made by the BORROWERS with the CREDITORS.
All obligations covered by this indenture shall be evidenced by a mortgage participation certificate
in the form of schedule ii hereof, the issuance of which by the trustee to the participating creditor/s
shall be in accordance with section 7 of this indenture, provided the aggregate loan values of the
collateral, based on the latest appraisal thereof, are not exceeded.
Moreover, it is worthy to note that respondents do not assail the previous MTI executed with BPI.
They do not question the validity of the mortgage constituted over all or substantially all of respondent
Centros assets pursuant to the 21 March 1994 MTI in the amount of P 84 million. Nor do they question
the additional loans increasing the value of the mortgage to P 144 million; or the use of Centros
properties as collateral for the loans of San Carlos, Lucky Two Corporation, and Lucky Two Repacking.
379 | P a g e
YAM
vs.
COURT OF APPEALS
GR No. 104726
11 February 1999
FACTS:
Parties entered into several loan agreements, the petitioners, Yam and Lent, being the borrowers
while the private respondent, Manphil Investment Corporaton, the lender. In said contract, petitioners
were given a loan of P500,000.00 by private respondent. The contract provided for the payment of 12%
annual interest, 2% monthly penalty, 1 1/2% monthly service charge, and 10% attorney's fees.
Denominated the first Industrial Guarantee and Loan Fund (IGLF), the loan was secured by a chattel
mortgage on the printing machinery in petitioners' establishment.
By April 2, 1985, petitioners had paid their first loan of P500,000.00. On November 4, 1985,
private respondent was placed under receivership by the Central Bank and Ricardo Lirio and Cristina
Destajo were appointed as receiver and in-house examiner, respectively.
A check was sent to respondent as partial payment of the second loan which was marked as full
payment in the vouchers. Demands were made for the balance of the same, however, it was unheeded
prompting respondent to file a case against the petitioner for collection of the balance.
The trial court ruled in favor of respondents which the Court of Appeals affirmed.
ISSUE:
Whether or not petitioner is liable to the penalties and service charges of the loan.
RULING:
YES.
The alleged condonation of the penalties and service charges by Sobrepeas, president of
respondent, must be in writing to be binding between and among the parties. Since it was not reduced
in writing, the same is not effective.
Further, the alleged condonation happened after the respondent
corporation was placed under receivership. As held in Villanueva v. Court of Appeals the appointment
of a receiver operates to suspend the authority of a corporation and of its directors and officers over its
property and effects, such authority being reposed in the receiver. Thus, Sobrepeas had no authority
to condone the debt. Petition denied.
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CHUNG KA BIO
vs.
INTERMEDIATE APPELLATE COURT
G.R. NO. 71837
JULY 26, 1988
FACTS:
The Philippine Blooming Mills Company, Inc. was incorporated on January 19, 1952, for a term of
25 years which expired on January 19,1977. On May 14, 1977, the members of its board of directors
executed a deed of assignment of all of the accounts receivables, properties, obligations and liabilities of
the old PBM in favor of Chung Siong Pek in his capacity as treasurer of the new PBM, then in the
process of reincorporation.On June 14, 1977, the new PMB was issued a certificate of incorporation by
the Securities and Exchange Commission.
On May 5, 1981, Chung Ka Bio and the other petitioners herein, all stockholders of the old PBM,
filed with the SEC a petition for liquidation (but not for dissolution) of both the old PBM and the new
PBM. The allegation was that the former had become legally non-existent for failure to extend its
corporate life and that the latter had likewise been ipso facto dissolved for non-use of the charter and
continuous failure to operate within 2 years from incorporation.
ISSUE:
Whether or not the board of directors of an already dissolved corporation have the inherent power,
without the express consent of the stockholders, to convey all its assets to a new corporation.
RULING:
YES.
While we agree that the board of directors is not normally permitted to undertake any activity
outside of the usual liquidation of the business of the dissolved corporation, there is nothing to prevent
the stockholders from conveying their respective shareholdings toward the creation of a new corporation
to continue the business of the old. Winding up is the sole activity of a dissolved corporation that does
not intend to incorporate anew. If it does, however, it is not unlawful for the old board of directors to
negotiate and transfer the assets of the dissolved corporation to the new corporation intended to be
created as long as the stockholders have given their consent. This was not prohibited by the Corporation
Act. In fact, it was expressly allowed by Section 28-1/2.
The petitioners and the private respondents are not strangers but relatives and close business
associates. The PBM office is in the heart of Metro Manila. The new corporation, like the old, employs as
many as 2,000 persons, the same personnel who worked for the old PBM. Additionally, one of the
petitioners, Chung Siong Pek was one of the directors who executed the deed of assignment in favor of
the old PBM and it was he also who received the deeded assets on behalf and as treasurer of the new
PBM. Surely, these circumstances must operate to bar the petitioners now from questioning the deed of
assignment after this long period of inaction in the protection of the rights they are now belatedly
asserting. Laches has operated against them.
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Duration
REYNOLDS PHILIPPINE CORPORATION
vs.
COURT OF APPEALS
G.R. NO. L-36187
JANUARY 17, 1989
FACTS:
In its complaint of June 2, 1966, the petitioner sought to recover from the private respondent
Serg's Products, Inc. the sum of P32,565.62 representing the unpaid price of aluminum foils and cores
sold and delivered by it to the latter. The private respondent denied liability for payment of the account
on the ground that the aluminum foils and cores were ordered or purchased by Serg's Chocolate
Products, a partnership of Antonio Goquiolay and Luis Sequia Mendoza, not Serg's Products, Inc., a
corporation managed and controlled by Antonio Goquiolay and his wife Conchita Goquiolay, as majority
stockholders and principal officers.
ISSUE:
Whether or not the real debtor of the petitioner were the Private Respondents.
RULING:
YES.
Although the commercial documents were indeed in the name of "Serg's Chocolate Products," the
following facts proved that the true purchaser of the aluminum foils and cores from the petitioner, was
"Serg's Products, Inc." not the partnership denominated "Serg's Chocolate Products."
The attempt to make the two factories appear as two separate businesses, when in reality they are
but one, is but a devise to defeat the ends of the law and should not be permitted to prevail. Although
the coffee factory is a corporation and, by legal fiction, an entity existing separate and apart from
persons composing it, T and his family, it is settled that this fiction of law, which had 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.
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CELIA B. CHUA
vs.
NATIONAL LABOR RELATIONS COMMISSION
G.R. NOS. 89971-75 OCTOBER 17, 1990
FACTS:
In December, 1985, Stanford Microsystems, Inc. (Stanford) filed a petition for suspension of
payments and appointment of rehabilitation receiver with the Securities and Exchange Commission
(SEC). At that time, Stanford had seven (7) secured creditor banks and more or less seven thousand one
hundred twenty-four (7,124) employees. On February 5, 1986, the SEC declared Stanford to be in a state
of suspension of payments. It issued an order appointing Sycip Gorres & Velayo & Co. (SGV) as the
rehabilitation receiver. In view of these developments, the former employees of Stanford filed with the
Department of Labor and Employment (DOLE) cases for money claims.In January, 1987, the SEC
disapproved the Rehabilitation Plan submitted by SGV and dismissed Stanford's Petition for Suspension
of Payments and Appointment of a Rehabilitation Receiver. Subsequently, the SEC ordered Stanford's
liquidation.
At the time Stanford filed a petition for suspension of payments and appointment of rehabilitation
receiver with SEC, Stanford had seven (7) secured creditor banks and approximately 7,124 employees.
On March 13, 1987, the seven secured creditor banks of Stanford and 6,341 former employees executed
a Memorandum of Agreement to speed up the orderly liquidation of Stanford. All the creditor banks and
the said employees were represented by their respective counsel in the negotiations which were
supervised by Regional Director Luna C. Piezas of the DOLE, National Capital Region.
ISSUE:
Whether or not the SEC has original and exclusive jurisdiction over the liquidation of Stanford
including the procedures for settling the money claims of former workers and employees.
RULING:
YES.
Jurisdiction over liquidation proceedings of insolvent corporations is vested in the Securities and
Exchange Commission (SEC) pursuant to Presidential Decree No. 902-A, as amended. On the other
hand, jurisdiction over money claims of employees against their employers is vested in the Labor Arbiter
391 | P a g e
CARLOS GELANO
vs.
COURT OF APPEALS
G.R. NO. L-39050
FEBRUARY 24, 1981
FACTS:
Private respondent Insular Sawmill, Inc. is a corporation organized on September 17, 1945 with a
corporate life of fifty (50) years, or up to September 17, 1995, with the primary purpose of carrying on a
general lumber and sawmill business. To carry on this business, private respondent leased the
paraphernal property of petitioner-wife Guillermina M. Gelano for P1,200.00 a month. It was while
private respondent was leasing the aforesaid property that its officers and directors had come to know
petitioner-husband Carlos Gelano who received from the corporation cash advances on account of
rentals to be paid by the corporation on the land
Out of the cash advances in the total sum of P25,950.00, petitioner Carlos Gelano was able to pay
only P5,950.00 thereby leaving an unpaid balance of P20,000.00 which he refused to pay despite
repeated demands by private respondent. Petitioner Guillermina M. Gelano refused to pay on the ground
that said amount was for the personal account of her husband asked for by, and given to him, without
her knowledge and consent and did not benefit the family.
ISSUE:
Whether or not a dissolved corporation, could still continue prosecuting and defending suits after
its dissolution and beyond the period of three years.
RULING:
YES.
For this reason, Section 78 of the same law authorizes the corporation, "at any time during said
three years to convey all of its property to trustees for the benefit of members, Stockholders, creditors
and other interested," evidently for the purpose, among others, of enabling said trustees to prosecute
and defend suits by or against the corporation begun before the expiration of said period.
In the case at bar, when Insular Sawmill, Inc. was dissolved on December 31, 1960, under Section 77 of
the Corporation Law, it still has the right until December 31, 1963 to prosecute in its name the present
case. After the expiration of said period, the corporation ceased to exist for all purposes and it can no
longer sue or be sued.
However, a corporation that has a pending action and which cannot be terminated within the
three-year period after its dissolution is authorized under Section 78 to convey all its property to
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FOREIGN CORPORATIONS
Definition and Rights
AVON
vs.
COURT OF APPEALS et. al.
G.R. No. 97642
August 29, 1997
FACTS:
Yupangco Cotton Mills engaged to secure with Worldwide Security and Insurance Co. Inc., a
foreign corporation not doing business in the Philippines with no office, place of business or agents in
the Philippines, several of its properties for the periods July 6, 1979 to July 6, 1980 and from October 1,
1980 to October 1, 1981, under separate insurance policies for the same amount. Both contracts were
covered by reinsurance treaties between Worldwide Surety and Insurance and several foreign
reinsurance companies, including the petitioners.
On December 16, 1979 and May 2, 1981, within the respective effectivity periods of the policies,
the properties therein insured were razed by fire, thereby giving rise to the obligation of the insurer to
indemnify the Yupangco Cotton Mills. Partial payments were made by Worldwide Surety and Insurance
and some of the reinsurance companies.
On May 2, 1983, Worldwide Surety and Insurance, in a Deed of Assignment, acknowledged a
remaining balance of P19,444,447.75 still due Yupangco Cotton Mills, and assigned to the latter all
reinsurance proceeds still collectible from all the foreign reinsurance companies. Thus, in its interest as
assignee and original insured, Yupangco Cotton Mills instituted this collection suit against the
petitioners.
ISSUE:
Whether or not a foreign corporation has rights under Philippine law.
RULING:
YES.
A foreign corporation, is one which owes its existence to the laws of another state, and generally,
has no legal existence within the state in which it is foreign. It was also held that corporations have no
legal status beyond the bounds of the sovereignty by which they are created.
396 | P a g e
PALTING
vs.
SAN JOSE PETROLEUM INC.
G.R. No.L-14441. December 17, 1966
FACTS:
SAN JOSE OIL, is a domestic mining corporation, 90% of the outstanding capital stock of which
is owned by respondent SAN JOSE PETROLEUM, a foreign (Panamanian) corporation, the majority
interest of which is owned by OIL INVESTMENTS, INC., another foreign (Panamanian) company.
This latter corporation in turn is wholly (100%) owned by PANTEPEC OIL COMPANY, C. A., and
PANCOASTAL PETROLEUM COMPANY, C. A., both organized and existing under the laws of Venezuela.
As of September 30, 1956, there were 9,979 stockholders of PANCOASTAL PETROLEUM found in 49
American states and U.S. territories, holding 3,476,988 shares of stock; whereas, as of November 30,
1956, PANTEPEC OIL COMPANY was said to have 3,077,916 shares held by 12,373 stockholders
scattered in 49 American states.
In the two lists of stockholders, there is no indication of the citizenship of these stockholders, or
of the total number of authorized stocks of each corporation for the purpose of determining the
corresponding percentage of these listed stockholders in relation to the respective capital stock of said
corporation.
ISSUE:
Whether or not the "tie-up" between the two corporations is violative of the Constitution, the
Laurel-Langley Agreement, the Petroleum Act of 1949, and the Corporation Law.
RULING:
YES.
The privilege to utilize, exploit, and develop the natural resources of this country was granted, by
Article III of the Constitution, to Filipino citizens or to corporations or associations 60% of the capital of
which is owned by such citizens. With the Parity Amendment to the Constitution, the same right was
extended to citizens of the United States and business enterprises owned or controlled, directly or
indirectly, by citizens of the United States.
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Documentary
GMBH & CO.
vs.
Hon. ISNANI et al
G.R. No. 109272 August 10, 1994
FACTS:
Petitioner is a multinational company organized and existing under the laws of the Federal
Republic of Germany. On July 6, 1983, petitioner filed an application with the SEC for the
establishment of a RAH in the Philippines. The application was approved by the BOI on Sep. 6, 1983.
Consequently, on Sep. 20, 1983, the SEC issued a Certificate of Registration and License to petitioner.
Private respondent Romana Lanchinebre was a sales representative of petitioner. On March 1992,
she secured a loan of P25,000.00 from petitioner. Subsequently she made additional cash advances in
the sum of P10,000.00. Of the total amount, P12,170.37 remained unpaid. Despite demand, private
respondent Romana failed to settle her obligation.
On September 2, 1992, petitioner filed a Complaint for collection of sum of money against private
respondents spouses Romana and Teofilo Lanchinebre w/ the RTC. Instead of filing their Answer,
private respondents moved to dismiss the Complaint. This was opposed by petitioner.
ISSUE:
Whether or not the petitioner has capacity to sue and be sued in the Philippines despite the fact
that petitioner is duly licensed by the SEC to set up and operate a RAH in the country and that it has
continuously operated as such for the last 9 years.
RULING:
YES.
It is clear that petitioner is a foreign corporation doing business in the Philippines. Hence,
Petitioner is covered by the Omnibus Investment Code of 1987. Petitioner does not engage in commercial
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Amendment of License
AETNA CASUALTY & SURETY Co.
vs.
PACIFIC STAR LINE et al
G.R. No.L-26809
December 29, 1977
FACTS:
Smith Bell & Co. (Philippines), Inc. and Aetna Surety Casualty & Surety Co. Inc., as subrogee,
instituted a case to recover the amount of US$2,300.00 representing the value of the stolen and
damaged cargo plus litigation expenses and exemplary damages against Pacific Star Line, The Bradman
Co. Inc., Manila Port Service and/or Manila Railroad Company, Inc. alleging that Pacific Star Line, as a
common carrier, was operating the vessel SS Ampal on a commercial run between United States and
Philippine Ports including Manila; that the defendant, The Bradman Co. Inc., was the ship agent in the
Philippines for the SS Ampal and/or Pacific Star Line; that the Manila Railroad Co. Inc. and Manila Port
Service were the arrastre operators in the port of Manila and were authorized to delivery cargoes
discharged into their custody on presentation of release papers from the Bureau of Customs and the
steamship carrier and/or its agents; that plaintiff sustained losses due to the negligence of Pacific Star
Line prior to delivery of the cargo to Manila or, in the alternative, due to the negligence of Manila Port
Service after delivery of the cargo to it by the SS Ampal.
The defendants alleged that the plaintiff, Aetna Casualty & Surety Company, is a foreign
corporation not duly licensed to do business in the Philippines and, therefore, without capacity to sue
and be sued.
ISSUE:
Whether or not Aetna Casualty & Surety Company, a foreign corporation not doing business in
the Philippines, can claim damages against defendant.
RULING:
400 | P a g e
YES.
It is settled that if a foreign corporation is not engaged in business in the Philippines, it may not
be denied the right to file an action in Philippine courts for isolated transactions.
The object of Sections 68 and 69 of the Corporation Law was not to prevent the foreign
corporation from performing single acts, but to prevent it from acquiring a domicile for the purpose of
business without taking the steps necessary to render it amenable to suit in the local courts. It was
never the purpose of the Legislature to exclude a foreign corporation which happens to obtain an
isolated order for business from the Philippines, from securing redress in the Philippine courts.
Aetna Casualty & Surety Company is not transacting business of insurance in the Philippines for
which it must have a license. The contract of insurance was entered into in New York, U.S.A., and
payment was made to the consignee in its New York branch.
Since, Aetna Casualty & Surety Company is not engaged in the business of insurance in the
Philippines but is merely collecting a claim assigned to it by the consignee, it is not barred from filing
the instant case although it has not secured a license to transact insurance business in the Philippines.
The case is remanded to the trial court for further proceedings to determine the liability of the
defendants-appellees.
HATHIBHAI BULAKHIDAS
vs.
HONORABLE PEDRO L. NAVARRO
L-49695
April 7, 1986
FACTS:
Petitioner, a foreign partnership, filed a complaint against a domestic corporation, DSC, before the
CFI of Rizal for the recovery of damages allegedly caused by the failure of the said shipping corporation
to deliver the goods shipped to it by petitioner to their proper destination.
Paragraph 1 of said complaint alleged that plaintiff is "a foreign partnership firm not doing
business in the Philippines" and that it is "suing under an isolated transaction." Defendant filed a
motion to dismiss the complaint on the ground that plaintiff has no capacity to sue and that the
complaint does not state a valid cause of action against defendant.
Acting on said motion to dismiss, the CFI dismissed the complaint on the ground that plaintiff
being "a foreign corporation or partnership not doing business in the Philippines it cannot exercise the
right to maintain suits before our Courts."
ISSUE:
Whether a foreign corporation not engaged in business in the Philippines can institute an action
before Philippine courts.
RULING:
YES.
It is settled that if a foreign corporation is not engaged in business in the Philippines, it may not
be denied the right to file an action in Philippine courts for isolated transactions. The object of Sections
68 and 69 of the Corporation law was not to prevent the foreign corporation from performing single acts,
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RULING:
NO.
A branch has no separate legal personality. This Court is of the opinion that the key to the
resolution of this controversy is the relationship of the Philippine branches of Citibank and BA to their
respective head offices and their other foreign branches.
The Court begins by examining the manner by which a foreign corporation canestablish its
presence in the Philippines. It may choose to incorporate its own subsidiary asa domestic corporation,
in which case such subsidiary would have its own separate andindependent legal personality to conduct
business in the country. In the alternative, it maycreate a branch in the Philippines, which would not be
a legally independent unit, andsimply obtain a license to do business in the Philippines.
In the case of Citibank and BA, it is apparent that they both did not incorporate a separate
domestic corporation to represent its business interests in the Philippines. Their Philippine branches
are, as the name implies, merely branches, without a separate legal personality from their parent
company, Citibank and BA. Thus, being one and the same entity, the funds placed by the respondents in
their respective branches inthe Philippines should not be treated as deposits made by third parties
subject to deposit insurance under the PDIC Charter.
Deposit insurance is superfluous and entirely unnecessary when, as in this case, the institution
holding the funds and the one which made theplacements are one and the same legal entity.
CARGILL, INC.
vs.
INTRA STRATA ASSURANCE CORPORATION
G.R. No. 168266
March 15, 2010
FACTS:
Cargill (foreign) is a corporation organized and existing under the laws of theState of Delaware.
Cargill executed a contract with Northern Mindanao Corporation (NMC)(domestic), whereby NMC agreed
to sell to petitioner 20,000 to 24,000 metrictons of molasses to be delivered from Jan 1 to 30 1990 for
$44 per metric ton. The contract provided that CARGILL was to open a Letter of Credit with theBPI. NMC
was permitted to draw up 500,000 representing the minimum priceof the contract. The contract was
amended 3 times (in relation to the amount and the price).But the third amendment required NMC to
put up a performance bond whichwas intended to guarantee NMCs performance to deliver the molasses
duringthe prescribed shipment periods.
In compliance, INTRA STRATA issued a performance bond to guaranteeNMCs delivery. NMC was
only able to deliver 219551 metric tons out of the agreed 10,500.Thus CARGILL sent demand letters to
INTRA claiming payment under theperformance and surety bonds. When INTRA failed to pay, CARGILL
filed acomplaint.
CARGILL NMC and INTRA entered into a compromise agreement approvedby the court, such
provided that NMC would pay CARGILL 3 million uponsigning and would deliver to CARGILL 6,991
metric tons of molasses. ButNMC still failed to comply.
ISSUE:
Whether or not petitioner is doing or transacting business in the Philippines in contemplation of
the law and established jurisprudence.
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RULING:
NO.
The determination of whether a foreign corporation is doing business in the Philippines must be
based on the facts of each case. In the case at bar, the transactions entered into by the respondent with
the petitioners are not a series of commercial dealings which signify an intent on the part of the
respondent to do business in the Philippines but constitute an isolated one which does not fall under
the category of "doing business." The records show that the only reason why the respondent entered into
the second and third transactions with the petitioners was because it wanted to recover the loss it
sustained from the failure of the petitioners to deliver the crude coconut oil under the first transaction
and in order to give the latter a chance to make good on their obligation.
In the present case, petitioner is a foreign company merely importing molasses from a Philipine
exporter. A foreign company that merely imports goods from a Philippine exporter, without opening an
office or appointing an agent in the Philippines, is not doing business in the Philippines.
SEHWANI, INC.
vs.
IN-N-OUT BURGER
GR No. 171053
15 October 2007
FACTS:
Respondent IN-N-OUT Burger, Inc., a foreign corporation organized under the laws of California,
U.S.A., and not doing business in the Philippines, filed before the Bureau of Legal Affairs of the IPO
(BLA-IPO), an administrative complaint against petitioners Sehwani, Inc. and Benitas Frites, Inc. for
violation of intellectual property rights, attorneys fees and damages with prayer for the issuance of a
restraining order or writ of preliminary injunction in registering, as it did, the mark claimed by
respondent.
The BLA-IPO held that petitioner is not guilty of unfair competition although respondent has the
capacity to sue and ordered petitioner to cease and desist from using the mark which the higher courts
affirmed.
ISSUE:
Whether or not respondent has legal capacity to sue.
RULING:
YES.
Respondent has the legal capacity to sue for the protection of its trademarks, albeit it is not doing
business in the Philippines. Section 160 in relation to Section 3 of R.A. No. 8293, provides:
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RULING:
YES.
Subrogration contemplates full substitution such that it places the party subrogated in the shoes
of the creditor, and he may use all means which the creditor could employ to enforce payment. The
rights to which the subrogee succeeds are the same as, but not greater than, those of the person for
whom he is substituted. The law on corporations is clear in depriving foreign corporations which are
doing business in the Philippines without a license from bringing or maintaining actions before, or
intervening in Philippine courts but a foreign corporation needs no license to sue before Philippine
courts on an isolated transaction.
For "doing business" is not really the number or the quantity of the transactions, but more
importantly, the intention of an entity to continue the body of its business in the country. The phrase
"isolated transaction" has a definite and fixed meaning, i.e. a transaction or series of transactions set
apart from the common business of a foreign enterprise in the sense that there is no intention to engage
in a progressive pursuit of the purpose and object of the business organization. Whether a foreign
corporation is "doing business" does not necessarily depend upon the frequency of its transactions, but
more upon the nature and character of the transactions. Furthermore, respondent insurer Chubb and
Sons, by virtue of the right of subrogation provided for in the policy of insurance, is the real party in
interest in the action for damages before the court a quo against the carrier Lorenzo Shipping to recover
for the loss sustained by its insured.
It then, thus possesses the right to enforce the claim and the significant interest in the litigation.
In the case at bar, it is clear that respondent insurer was suing on its own behalf in order to enforce its
right of subrogation.
MR HOLDINGS, Ltd.
vs.
BAJAR
G.R. No. 138104 April 11, 2002
FACTS:
ADB extended a loan to Marcopper under a Principal Loan Agreement and Complementary Loan
Agreement. A Support and Standby Credit Agreement was also executed between ADB and Placer Dome
(owner of 40% of Marcopper), whereby the latter agreed to provide with a cash flow support for the
payment of its obligations to ADB. Marcopper also executed a Deed of Real Estate and Chattel Mortgage
in favor of ADB covering all its assets in Marinduque. Marcopper defaulted in its payment. Thus, MR
Holding, LTD (placer Domes subsidiary corporation) assumed Marcoppers obligation to ADB.
Marcopper likewise executed a Deed of assignment in favor of petitioner.
It appeared that SolidBank Corporation obtained a partial judgment against Marcopper in a case
filed with the RTC. A writ of execution was issued and then an auction sale was scheduled. This event
prompted petitioner to serve an "Affidavit of Third-Party Claim" upon respondent sheriffs, asserting
ownership over all the assets of Marcopper by virtue of the Deed of Assignment. The RTC of Manila
denied the affidavit.
Petitioner filed with the RTC of Boac, Marinduque a complaint for reivindication of properties with
prayer for preliminary injunction and temporary restraining order against respondents. The application
for writ of preliminary injunction was denied.
ISSUE:
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RULING:
YES.
The law is clear: "No foreign corporation transacting business in the Philippines without a license,
or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding
in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded
against before Philippine courts or administrative tribunals on any valid cause of action recognized
under Philippine laws."
However, the Court in a long line of cases has held that a foreign corporation not engaged in
business in the Philippines may not be denied the right to file an action in the Philippine courts for an
isolated transaction. The fact that a foreign corporation is not doing business in the Philippines must be
disclosed if it desires to sue in Philippine courts under the "isolated transaction rule." Without this
disclosure, the court may choose to deny it the right to sue.
In the case at bar, the private respondents K.M.K. and INDRAPAL aver that they are "suing upon
a singular and isolated transaction." But they failed to prove their legal existence or juridical personality
as foreign corporations.
Under the "isolated transaction rule," only foreign corporations and not just any business
organization or entity can avail themselves of the privilege of suing before Philippine courts even without
a license. The first paragraph of their petition before the Court, containing the allegation of their
identities, does not even aver their corporate character. On the contrary, K.M.K. alleges that it is a
"single proprietorship" while INDRAPAL hides under the vague identification as a "firm," although both
describe themselves with the phrase "doing business in accordance with the laws of Singapore."
Absent such proof that the private respondents are corporations (foreign or not), the respondent
Court of Tax Appeals should have barred their invocation of the right to sue within Philippine
jurisdiction under the "isolated transaction rule" since they do not qualify for the availment of such
right.
COMMUNICATION MATERIALS and DESIGN, INC.
vs.
COURT OF APPEALS
G.R. No. 102223 August 22, 1996
FACTS:
Petitioners COMMUNICATION MATERIALS AND DESIGN, INC., (CMDI, for brevity) and ASPAC
MULTI-TRADE INC., (ASPAC, for brevity) are both domestic corporations, while petitioner Francisco S.
Aguirre is their President and majority stockholder. Private Respondents ITEC, INC. and/or ITEC,
INTERNATIONAL, INC. (ITEC, for brevity) are corporations duly organized and existing under the laws of
the State of Alabama, United States of America. There is no dispute that ITEC is a foreign corporation
not licensed to do business in the Philippines.
ITEC entered into a contract with petitioner ASPAC referred to as "Representative Agreement".
ITEC engaged ASPAC as its "exclusive representative" in the Philippines for the sale of ITEC's products,
in consideration of which, ASPAC was paid a stipulated commission. ASPAC was able to incorporate and
use the name "ITEC" in its own name. Thus , ASPAC Multi-Trade, Inc. became legally and publicly
known as ASPAC-ITEC (Philippines).
ASPAC sold electronic products, exported by ITEC, to their sole customer, the Philippine Long
Distance Telephone Company, (PLDT, for brevity). ITEC charges the petitioners and another Philippine
Corporation, DIGITAL BASE COMMUNICATIONS, INC. (DIGITAL, for brevity), the President of which is
likewise petitioner Aguirre, of using knowledge and information of ITEC's products specifications to
develop their own line of equipment and product support, which are similar, if not identical to ITEC's
own, and offering them to ITEC's former customer.
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YES.
The resolution of this issue depends on whether petitioner's business with private respondent
may be treated as isolated transactions. Granting that there is no distributorship agreement between
herein parties, yet by the mere fact that plaintiff, each time that the defendant posts an order delivers
the items as evidenced by the several invoices and receipts of various dates only indicates that plaintiff
has the intention and desire to repeat the said transaction in the future in pursuit of its ordinary
business. Furthermore, "and if the corporation is doing that for which it was created, the amount or
volume of the business done is immaterial and a single act of that character may constitute doing
business.
More than the sheer number of transactions entered into, a clear and unmistakable intention on
the part of petitioner to continue the body of its business in the Philippines is more than apparent. As
alleged in its complaint, it is engaged in the manufacture and sale of elements used in sealing pumps,
valves, and pipes for industrial purposes, valves and control equipment used for industrial fluid control
and PVC pipes and fittings for industrial use. Thus, the sale by petitioner of the items covered by the
receipts, which are part and parcel of its main product line, was actually carried out in the progressive
prosecution of commercial gain and the pursuit of the purpose and object of its business, pure and
simple.
Further, its grant and extension of 90-day credit terms to private respondent for every purchase
made, unarguably shows an intention to continue transacting with private respondent, since in the
usual course of commercial transactions, credit is extended only to customers in good standing or to
those on whom there is an intention to maintain long-term relationship.
This being so, the existence of a distributorship agreement between the parties, as alleged but not
proven by private respondent, would, if duly established by competent evidence, be merely corroborative,
and failure to sufficiently prove said allegation will not significantly affect the finding of the courts below.
Thus, the court holds that the series of transactions in question could not have been isolated or
casual transactions. What is determinative of "doing business" is not really the number or the quantity
of the transactions, but more importantly, the intention of an entity to continue the body of its business
in the country. The number and quantity are merely evidence of such intention.
FAR EAST INTERNATIONAL
vs.
NANKAI KOGYO
L- 13525
NOVEMBER 3, 1962
FACTS:
Far East entered into a contract of sale of steel scrap with Nankai , a foreign corporation
incorporated under Japanese laws. Nankai opened a letter of credit with the China Banking Corporation
issued by Nippon Kangyo. Four days before the expiration of the Far East license, three boats of Nankai
arrived. Upon the expiration of the export license, only 1, 058.6 metric tons of steel scrap was loaded on
the SS Mina. The license was never renewed.
On April 27, 1957, Nankai confirmed and acknowleged delivery of the 1,058.6 metric tons of steel
scrap, but asked for damages amounting to $148,135.00 consisting of dead freight charges, damages,
bank charges, phone and cable expenses.
On May 4, 1957, Far East wrote the Everett Steamship Corporation, requesting the issuance of a
complete set of the Bill of Lading for the shipment, in order that payment thereof be effected against the
Letter of Credit. Under date of May 7, 1957, the Everett informed Far East that they were not in a
position to comply because the Bill of Lading was issued and signed in Tokyo by the Master of the boat,
upon request of the Charterer, defendant herein.
As repeated requests, both against the shipping agent and the buyers (Nankai), for the issuance of
the of Bill Lading were ignored, Far East filed on May 16, 1957, the present complaint for Specific
Performance, damages, a writ of preliminiry mandatory injunction directed against Nankai and the
shipping company, to issue and deliver to the plaintiff, a complete set of negotiable of Lading for the
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LA CHEMISE LACOSTE, S. A.
vs.
FERNANDEZ
G.R. No. L-65659
May 21, 1984
FACTS:
The petitioner is a foreign corporation, organized and existing under the laws of France and not
doing business in the Philippines. It is the actual owner of the abovementioned trademarks used on
clothings and other goods specifically sporting apparels sold in many parts of the world and which have
been marketed in the Philippines since 1964. The main basis of the private respondent's case is its claim
of alleged prior registration.
In 1975, Hemandas & Co., a duly licensed domestic firm applied for and was issued Reg. No. SR2225 (SR stands for Supplemental Register) for the trademark "CHEMISE LACOSTE & CROCODILE
DEVICE" by the Philippine Patent Office for use on T-shirts, sportswear and other garment products of
the company. Two years later, it applied for the registration of the same trademark under the Principal
Register. The Patent Office eventually issued an order which granted the application."Thereafter,
Hemandas & Co. assigned to respondent Gobindram Hemandas all rights, title, and interest in the
trademark "CHEMISE LACOSTE & DEVICE".
The petitioner filed its application for registration of the trademark "Crocodile Device" and
"Lacoste". The former was approved for publication while the latter was opposed by Games and
Garments. The petitioner filed with the National Bureau of Investigation (NBI) a letter-complaint alleging
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SBMA
vs.
UNIVERSAL INTERNATIONAL GROUP OF TAIWAN
GR. NO. 131680 SEPTEMBER 14, 2000
FACTS:
In 1995, a Lease and Development Agreement was executed by respondent UIG and petitioner
SBMA under which respondent UIG shall lease from petitioner SBMA the Binictican Golf Course and
appurtenant facilities thereto to be transformed into a world class 18-hole golf course, golf club/resort,
commercial tourism and residential center. The contract in pertinent part contains pre-termination
clauses, which provides in its Section 22 thereof the acts which constitute what is default.
In 1997, Petitioner SBMA sent a letter to private respondent UIG calling its attention to its alleged
several contractual violations in view of private respondent UIGs failure to deliver its various contractual
obligations, primarily its failure to complete the rehabilitation of the Golf Course in time for the APEC
Leaders Summit, and to pay accumulated lease rentals and utilities, and to post the required
performance bond.
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TIME, INC.
vs.
REYES
G.R. No.L-28882 May 31, 1971
FACTS:
This is a petition by Time, Inc. for certiorari and prohibition, with preliminary injunctions, to
annul certain orders of the respondent CFI of Rizal, issued in its Civil Case No. 10403, entitled Antonio
J. Villegas and Juan Ponce Enrile vs. Time, Inc., and to prohibit the said Rizal court from further
proceeding with the said civil case contending that it is the Manila CFI which has the jurisdiction.
The petition alleges that the petitioner time, Inc., is an American Corporation with principal
offices at Rockefeller Center, New York City, N.Y., and is the publisher of Time, a weekly magazine; the
petition, however, does not alleged the petitioners legal capacity to sue in the courts of the Philippines.
In said civil case, therein plaintiffs Antonio J. Villegas and Juan Ponce Enrile seek to recover from
the therein petitioner damages upon an alleged of libel arising from a publication of time(Asia Edition)
magazine, in its issue of 18 August 1967, of an essay, entitled Corruption in Asia.
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ISSUE:
Whether or not the petition will prosper.
RULING:
YES.
The dismissal of the present petition is asked on the ground that the petitioner foreign
corporation failed to allege its capacity to sue in the courts of the Philippines.
The Court failed to see how these doctrines can be a propos in the case at bar, since the
petitioner is not maintaining any suit but is merely defending one against itself; it did not file any
complaint but only a corollary defensive petition to prohibit the lower court from further proceeding with
a suit that it had no jurisdiction to entertain.
Petitioners failure to aver its legal capacity to institute the present petition is not fatal, for a
foreign corporation may by writ of prohibition, seek relief against the wrongful assumption of
jurisdiction. And a foreign corporation seeking a writ of prohibition against further maintenance a suit,
on the ground of want jurisdiction, is not bound by the ruling of the court in which the suit was
brought, on the motion to quash service of summons, that it has jurisdiction.
The writs applied for are granted: the respondent Court of First Instance of Rizal is declared
without jurisdiction to take cognizance of its Civil Case No. 10403; and its orders issued in connection
therewith are hereby annulled and set aside. Respondent court is further commanded to desist from
further proceedings in Civil case No. 10403 aforesaid.
VICMAR DEVELOPMENT
vs.
COURT OF APPEALS
G.R. No. 81547
May 21, 1990
FACTS:
Sometime in August, 1982, a conflict arose between petitioner Vicente Angliongto and private
respondent Rufino T. Nasser on the matter of exclusive control and management of Petitioner
Corporation. On July 7, 1983, petitioner Corporation by petitioner Angliongto, filed a verified petition in
the public respondent SEC against private respondent Nasser, alleging, that private respondent Nasser
was a Director, Executive Vice-President and General Manager of petitioner Corporation from 1974 to
August 26, 1982 but during the annual meeting of stockholders of petitioner corporation held on August
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FACTS:
Fabia was the President of private respondent MTCP, a domestic corporation engaged in providing
maritime courses and seminars to prospective overseas contract workers and seamen. He was likewise a
Director and stockholder thereof. MTCP filed an affidavit-complaint for estafa against Hernani N. Fabia
alleging that on various occasions Fabia drew cash advances from MTCP, covered by cash vouchers
which he failed to liquidate despite repeated demands. Fabias defense is that such were in the nature of
simple loans that had already been liquidated and paid. The Office of the City Prosecutor of Manila
dismissed the complaint for lack of jurisdiction for the reason that the controversy pertained to the
relationship between a corporation and a former officer it was the Securities and Exchange Commission
(SEC) which had original and exclusive jurisdiction over the case.
ISSUE:
Whether or not SEC have jurisdiction over the case?
RULING:
YES.
The jurisdiction of the SEC to "intra-corporate disputes" defined as any act or omission of the
Board of Directors/Trustees of corporations, or of partnerships, or of other associations, or of their
stockholders, officers, or partners, including any fraudulent devices, schemes or representations, in
violation of any law or rules and regulations administered and enforced by the Commission. Petitioner
was the President as well as a Director and stockholder in private respondent MTCP, who was charged
with the misappropriation or diversion of corporate funds after having failed to liquidate the amount he
had received as cash advances from the company. The charge against petitioner is for estafa, an offense
punishable under The Revised Penal Code (RPC), and prosecution for the offense is presently before the
regular courts. However, jurisdiction is determined not from the law upon which the cause of action is
based, nor the type of proceedings initiated, but rather, it is gleaned from the allegations stated in the
complaint. It is evident from the complaint that the acts charged are in the nature of an intra-corporate
dispute as they involve fraud committed by virtue of the office assumed by petitioner as President,
Director, and stockholder in MTCP, and committed against the MTCP corporation. This sufficiently
removes the action from the jurisdiction of the regular courts, and transposes it into an intra-corporate
controversy within the jurisdiction of the SEC. The fact that a complaint for estafa, a felony punishable
under the RPC, has been filed against petitioner does not negate and nullify the intra-corporate nature
of the cause of action, nor does it transform the controversy from intra-corporate to a criminal one.
Accordingly, as the matter involves an intra-corporate dispute within the jurisdiction of the SEC, the
issue of whether prior non-accounting precludes a finding of probable cause for the charge of estafa no
longer finds relevance.
However, in conformity with RA 8799, The Securities Regulation Code, amending PD 902-A,
which has effectively transferred the jurisdiction of the Securities and Exchange Commission over all
cases enumerated under Sec. 5 of PD 902-A to the courts of general jurisdiction or the appropriate
Regional Trial Courts.
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RENATO REAL
vs.
SANGU PHILIPPINES, INC. and/ or KIICHI ABE
G.R. No. 168757. January 19, 2011
FACTS:
Petitioner Renato Real was the Manager of respondent corporation Sangu Philippines, Inc., a
corporation engaged in the business of providing manpower for general services, like janitors, janitresses
and other maintenance personnel, to various clients. In 2001, petitioner, together with 29 others who
were either janitors, janitresses, leadmen and maintenance men, all employed by respondent
corporation, filed their respective Complaints for illegal dismissal against the latter and respondent
Kiichi Abe, the corporations Vice-President and General Manager. These complaints were later on
consolidated.
With regard to petitioner, he was removed from his position as Manager through Board Resolution
2001-033 adopted by respondent corporations Board of Directors. Petitioner complained that he was
neither notified of the Board Meeting during which said board resolution was passed nor formally
charged with any infraction. He just received from respondents a letter 4 dated March 26, 2001 stating
that he has been terminated from service effective March 25, 2001 for the following reasons: (1)
continuous absences at his post at Ogino Philippines Inc. for several months which was detrimental to
the corporations operation; (2) loss of trust and confidence; and, (3) to cut down operational expenses to
reduce further losses being experienced by respondent corporation.
ISSUE:
Whether or not petitioners complaint for illegal dismissal constitutes an intra-corporate
controversy and thus, beyond the jurisdiction of the Labor Arbiter.
RULING:
NO.
With the elements of intra-corporate controversy being absent in this case, we thus hold that
petitioners complaint for illegal dismissal against respondents is not intra-corporate. Rather, it is a
termination dispute and, consequently, falls under the jurisdiction of the Labor Arbiter pursuant to
Section 217 of the Labor Code.
With the foregoing, it is clear that the CA erred in affirming the decision of the NLRC which
dismissed petitioners complaint for lack of jurisdiction. In cases such as this, the Court normally
remands the case to the NLRC and directs it to properly dispose of the case on the merits. "However,
when there is enough bases on which a proper evaluation of the merits of petitioners case may be had,
the Court may dispense with the time-consuming procedure of remand in order to prevent further
delays in the disposition of the case." It is already an accepted rule of procedure for us to strive to settle
the entire controversy in a single proceeding, leaving no root or branch to bear the seeds of litigation. If,
based on the records, the pleadings, and other evidence, the dispute can be resolved by us, we will do so
to serve the ends of justice instead of remanding the case to the lower court for further proceedings."We
have gone over the records before us and we are convinced that we can now altogether resolve the issue
of the validity of petitioners dismissal and hence, we shall proceed to do so.
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GARCIA
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PSBA
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RULING:
YES.
As between the creditors, the key phrase is "equality is equity." When a corporation threatened by
bankruptcy is taken over by a receiver, all the creditors should stand on equal footing. Not anyone of
them should be given any preference by paying one or some of them ahead of the others. This is
precisely the reason for the suspension of all pending claims against the corporation under receivership.
Instead of creditors vexing the courts with suits against the distressed firm, they are directed to file their
claims with the receiver who is a duly appointed officer of the SEC.
Since then, the principle of equality in equity has been cited as the basis for placing secured and
unsecured creditors in equal footing or in pari passu with each other during rehabilitation. In legal
parlance, pari passu is used especially of creditors who, in marshaling assets, are entitled to receive out
of the same fund without any precedence over each other.
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JOSE MARCEL PANLILIO, ERLINDA PANLILIO, NICOLE MORRIS and MARIO T. CRISTOBAL
vs.
REGIONAL TRIAL COURT, BRANCH 51, CITY OF MANILA, represented by HON. PRESIDING
JUDGE ANTONIO M. ROSALES; PEOPLE OF THE PHILIPPINES; and the SOCIAL SECURITY
SYSTEM
G.R. No. 173846. February 2, 2011
FACTS:
On October 15, 2004, Jose Marcel Panlilio, Erlinda Panlilio, Nicole Morris and Marlo Cristobal
(petitioners), as corporate officers of Silahis International Hotel, Inc. (SIHI), filed with the Regional Trial
Court (RTC) of Manila, Branch 24, a petition for Suspension of Payments and Rehabilitation 4 in SEC
Corp. Case No. 04-111180.
On October 18, 2004, the RTC of Manila, Branch 24, issued an Orderstaying all claims against SIHI
upon finding the petition sufficient in form and substance.
The Court shares the view of the private complainants and the SSS that the said stay order does
not include the prosecution of criminal offenses. Precisely, the law "criminalizes" the non-remittance of
SSS contributions by an employer to protect the employees from unscrupulous employers. Clearly, in
these cases, public interest requires that the said criminal acts be immediately investigated and
prosecuted for the protection of society.
ISSUE:
Whether or not the suspension of "all claims" as an incident to a corporate rehabilitation also
contemplate the suspension of criminal charges filed against the corporate officers of the distressed
corporation.
RULING:
NO.
The prosecution of the officers of the corporation has no bearing on the pending rehabilitation of
the corporation, especially since they are charged in their individual capacities. Such being the case, the
purpose of the law for the issuance of the stay order is not compromised, since the appointed
rehabilitation receiver can still fully discharge his functions as mandated by law. It bears to stress that
the rehabilitation receiver is not charged to defend the officers of the corporation. If there is anything
that the rehabilitation receiver might be remotely interested in is whether the court also rules that
petitioners are civilly liable. Such a scenario, however, is not a reason to suspend the criminal
proceedings, because as aptly discussed in Rosario, should the court prosecuting the officers of the
corporation find that an award or indemnification is warranted, such award would fall under the
category of claims, the execution of which would be subject to the stay order issued by the rehabilitation
court. The penal sanctions as a consequence of violation of the SSS law, in relation to the revised penal
code can therefore be implemented if petitioners are found guilty after trial.
However, any civil indemnity awarded as a result of their conviction would be subject to the stay
order issued by the rehabilitation court. Only to this extent can the order of suspension be considered
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RTC.
Whether or not the mere filing with the SEC of such petition suspends the proceedings in the
RULING:
NO.
The appointment of a management committee or rehabilitation receiver may only take place after
the filing with the SEC of an appropriate petition for suspension of payments. This is clear from a
reading of sub-paragraph (d) of Section 5 and sub-paragraph (d) of Section 6 of P.D. No. 902-A, as
amended by P.D. Nos. 1653 and 1758.
The conclusion then is inevitable that pursuant to the underscored proviso in sub-paragraph (c)
of the aforementioned Section 6, taken together with sub-paragraph (d) of Section 5 and sub-paragraph
(d) of Section 6, a court is ipsojure suspended only upon the appointment of a management committee
or a rehabilitation receiver. Since there is no showing at all that a management committee or
rehabilitation receiver for BAROTAC has been appointed by the SEC, suspension of the proceedings
before the RTC of Quezon City is not warranted.
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EXEMPT TRANSACTIONS
PUBLIC COMPANIES
FRAUDULENT TRANSACTIONS
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TENDER OFFERS
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