CORPORATE NAME

INDIAN CHAMBER OF COMMERCE PHILS. VS FILIPINO INDIAN CHAMBER OF

COMMERCE IN THe PHILIPPINES, INC., GR NO. 184008, 2016-08-03
FACTS
• FICCPI (defunct/not existing) originally registered in SEC as Indian Chamber of
Commerce of Manila, Inc. on November 24, 1951.
• On October 7, 1959, it amended its corporate name into Indian Chamber of
Commerce of the Philippines, Inc., and then on March 4, 1977 further amended it
into Filipino-Indian Chamber of Commerce of the Philippines, Inc.
• Pursuant to its Articles of Incorporation, and without applying for an extension of its
corporate term, the defunct FICCPI’s term of existence expired on November 24,
2001.
• January 05, 2005, Mr.Naresh Mansukhani reserved the corporate name “Filipino
Indian Chamber of Commerce in the Philippines, Inc.” (FICCPI), for the period from
January 20, 2005 to April 20, 2005, with the Company Registration and Monitoring
Department (CRMD) of the SEC.
• April 01, 2005, an opposition letter by Mr. Ram Sitaldas , claiming to be the
representative of defunct FICCPI, alleged that the defunct FICCPI used the
corporate name since 1951, and the reservation of another person who is not
representative is illegal.
• May 27, 2005, the CRMD rendered a decision granting Mansukhani’s reservation,
holding that he possesses the better right over the corporate name. The CRMD
ruled that the defunct FICCPI has no legal personality to oppose the reservation of
the corporate name by Mansukhani. Thus, the name “Filipino Indian Chamber of
Commerce in the Philippines, Inc.” is free for appropriation by any party.
• Satildas appealed to the decision of CRMD to the SEC En Banc, which denied it.
• CA affirmed the decision of the SEC En Banc.On March 14, 2006, pending
resolution by the CA, the SEC issued the Certificate of Incorporation of respondent
FICCPI.
• December 08, 2005, Mr. Pracash Dayacanl, who allegedly represented the defunct
FICCPI, filed an application with the CRMD for the reservation of the corporate
name “Indian Chamber of Commerce Phils., Inc.” (ICCPI).
• Upon knowledge, Mansukhani, in a letter dated February 14, 2006, formally opposed
the application.
• In a letter dated April 5, 2006, the CRMD denied Mansukhani’s opposition. It stated
that the name “Indian Chamber of Commerce Phils., Inc.” is not deceptively or
confusingly similar to “Filipino Indian Chamber of Commerce in the Philippines, Inc.”
On the same date, the CRMD approved and issued the Certificate of Incorporation
of petitioner ICCPI.
• Thus, respondent FICCPI, through Mansukhani, appealed the CRMD’s decision to
the SEC En Banc which was granted and was affirmed by the CA. Hence, this
petition.
ISSUE
WON the name “Indian Chamber of Commerce Phils., Inc.” is deceptively similar with
“Filipino Indian Chamber of Commerce in the Philippines, Inc.”
RULING
• YES, Section 18 of the Corporation Code expressly prohibits the use of a corporate
name which is identical or deceptively or confusingly similar to that of any existing
corporation:
No corporate name may be allowed by the Securities and Exchange Commission if
the proposed name is identical or deceptively or confusingly similar to that of any
existing corporation or to any other name already protected by law or is patently
deceptive, confusing or contrary to existing laws. When a change in the corporate
name is approved, the Commission shall issue an amended certificate of
incorporation under the amended name.
• Section 17 of Revised Corporation Code states that: No corporate name shall be
allowed by the Commission if it is not distinguishable from that already reserved or
registered for the use of another corporation , or if such name is already protected
by law, or when it use is contrary to existing law, rules and regulation.
A name is not distinguishable even if it is contains one or more of the following:
a. The word “corporation”, “company”, “incorporated”, “limited”, “limited liability”, or
an abbreviation of one of such words; and
b. Punctuations, articles, conjunctions, contractions, prepositions, abbreviations,
different tenses, spacing, or number of the same words or phrase.
 ANG MGA KAANIB SA IGLESIA NG DIOS KAY KRISTO HESUS VS IGLESIA NG
DIOS KAY CRISTO JESUS, G.R. NO. 137592, 12 DECEMBER 2001

FACTS
• Respondent Iglesia ng Dios Kay Cristo Jesus, Haligi at Suhay ng Katotohanan
(Church of God in Christ Jesus, the Pillar and Ground of Truth), is a non-stock
religious society or corporation registered in 1936.
• Sometime in 1976, one Eliseo Soriano and several other members of respondent
corporation disassociated themselves from the latter and succeeded in registering
on March 30, 1977 a new non-stock religious society or corporation, named Iglesia
ng Dios Kay Kristo Hesus, Haligi at Saligan ng Katotohanan.
• Respondent corporation filed with the SEC a petition to compel the Iglesia ng Dios
Kay Kristo Hesus, Haligi at Saligan ng Katotohanan to change its corporate name to
another name that is not similar or identical to any name already used by a
corporation, partnership or association registered with the Commission.
• Petitioner is compelled to change its corporate name and be barred from using the
same or similar name on the ground that the same causes confusion among their
members as well as the public.
• EC rendered a decision ordering petitioner to change its corporate name. The Court
of Appeals rendered the assailed decision affirming the decision of the SEC En
Banc.
ISSUE
Whether the court of appeals failed to properly appreciate the scope of the constitutional
guarantee on religious freedom
RULING
• The additional words "Ang Mga Kaanib " and "Sa Bansang Pilipinas, Inc." in
petitioner's name are, as correctly observed by the SEC, merely descriptive of
and also referring to the members, or kaanib, of respondent who are likewise
residing in the Philippines.
• These words can hardly serve as an effective differentiating medium necessary
to avoid confusion or difficulty in distinguishing petitioner from respondent.
• This is especially so, since both petitioner and respondent corporations are using
the same acronym — H.S.K.; not to mention the fact that both are espousing
religious beliefs and operating in the same place.
• The fact that there are other non-stock religious societies or corporations using
the names Church of the Living God, Inc., Church of God Jesus Christ the Son of
God the Head, Church of God in Christ & By the Holy Spirit, and other similar
names, is of no consequence.
• It does not authorize the use by petitioner of the essential and distinguishing
feature of respondent's registered and protected corporate name.
• Ordering petitioner to change its corporate name is not a violation of its
constitutionally guaranteed right to religious freedom.
• In so doing, the SEC merely compelled petitioner to abide by one of the SEC
guidelines in the approval of partnership and corporate names, namely its
undertaking to manifest its willingness to change its corporate name in the event
another person, firm, or entity has acquired a prior right to the use of the said firm
name or one deceptively or confusingly similar to it.
• The instant petition for review is DENIED. The appealed decision of the Court of
Appeals is AFFIRMED in toto.
 DE LA SALLE MONTESORRI INTERNATIONAL OF MALOLOS, INC. VS, DE LA
SALLE BROTHERS, INC. G.R. NO. 205548, 07 FEBRUARY 2018

FACTS
• Petitioner reserved with the SEC its corporate nameDe La Salle Montessori
International Malolos, Inc.from June 4 to August 3, 2007,after which the SEC
indorsed petitioner's articles of incorporation and by-laws to the Department of
Education (DepEd) for comments and recommendation.
• DepEd returned the indorsement without objections.Consequently, the SEC issued a
certificate of incorporation to petitioner. Afterwards, DepEd Region III, City of San
Fernando, Pampanga granted petitioner government recognition for its pre-
elementary and elementary courses and for its secondary courses.
• On January 29, 2010, respondents De La Salle Brothers, Inc., De La Salle
University, Inc., La Salle Academy, Inc., De La Salle-Santiago Zobel School, Inc.
(formerly De La Salle-South, Inc.), and De La Salle Canlubang, Inc. (formerly De La
Salle University-Canlubang, Inc.) filed a petition with the SEC seeking to compel
petitioner to change its corporate name. Respondents claim that petitioner's
corporate name is misleading or confusingly similar to that which respondents
have acquired a prior right to use, and that respondents' consent to use such name
was not obtained.
• According to respondents, petitioner's use of the dominant phrases "La Salle"
and "De La Salle" gives an erroneous impression that De La Salle Montessori
International of Malolos, Inc. is part of the "La Salle" group, which violates Section
18 of the Corporation Code of the Philippines.
• The SEC OGC issued an Order directing petitioner to change or modify its corporate
name. It held, among others, that respondents have acquired the right to the
exclusive use of the name "La Salle" with freedom from infringement by priority of
adoption, as they have all been incorporated using the name ahead of petitioner.
• Furthermore, the name "La Salle" is not generic in that it does not particularly refer
to the basic or inherent nature of the services provided by respondents.
• As regards petitioner's argument that its use of the name does not result to
confusion, the SEC OGC held otherwise, noting that confusion is probably or
likely to occur considering not only the similarity in the parties' names but
also the business or industry they are engaged in, which is providing courses of
study in pre-elementary, elementary and secondary education.
• The SEC OGC disagreed with petitioner's argument that the case of Lyceum of the
Philippines, Inc. v. Court of Appeals(Lyceum of the Philippines) applies since the
word "lyceum" is clearly descriptive of the very being and defining purpose of an
educational corporation, unlike the term "De La Salle" or "La Salle."
ISSUE
Whether the CA erred in not applying the ruling in the Lyceum of the Philippines case
which petitioner argues have "the same facts and events" as in this case
RULING
• No. In this case, respondents' corporate names were registered on the following
dates: (1) De La Salle Brothers, Inc. on October 9, 1961 under SEC Registration
No. 19569; (2) De La Salle University, Inc. on December 19, 1975 under SEC
Registration No. 65138; (3) La Salle Academy, Inc. on January 26, 1960 under
SEC Registration No. 16293; (4) De La SalleSantiago Zobel School, Inc. on
October 7, 1976 under SEC Registration No. 69997; and (5) De La Salle
Canlubang, Inc. on August 5, 1998 under SEC Registration No. Al998-01021.On
the other hand, petitioner was issued a Certificate of Registration only on July 5,
2007 under Company Registration No. CN200710647.It being clear that
respondents are the prior registrants, they certainly have acquired the right to
use the words "De La Salle" or "La Salle" as part of their corporate names.
• The second requisite is also satisfied since there is a confusing similarity
between petitioner's and respondents' corporate names. While these corporate
names are not identical, it is evident that the phrase "De La Salle" is the
dominant phrase used.
BOARD OF DIRECTORS/ TUSTEES AND OFFICERS
TOM VS RODRIGUEZ, G.R. NO. 215764, 06 JULY 2015
FACTS
• Golden Dragon International Terminals, Inc. (GDITI) is the exclusive Shore
Reception Facility (SRF) Service Provider of the Philippine Ports Authority (PPA)
tasked to collect, treat, and dispose of all ship-generated oil wastes in all bases
and private ports under the PPA’s... jurisdiction.
• December 2008, Fidel Cu (Cu) sold via Deed of Conditional Sale his 17,237
shares of stock in GDITI to Virgilio S. Ramos (Ramos) and Cirilo C. Basalo, Jr.
(Basalo). When the latter failed to pay the purchase price, Cu... sold 15,233 of
the same shares through a Deed of Sale in favor of Edgar D. Lim (Lim), Eddie C.
Ong (Ong), and Arnold Gunnacao (Gunnacao), who also did not pay the
consideration therefor.
• September 11, 2009, the following were elected as officers of GDITI: Lim as
President and Chairman of the Board, Basalo as Vice President for Visayas and
Mindanao, Ong as Treasurer and Vice President for Luzon, and Gunnacao as
Director, among others.
• However, a group led by Ramos composed of individuals who were not elected
as officers of GDITI – which included Tom – forcibly took over the GDITI offices
and performed the functions of its officers. This prompted GDITI, through its duly-
elected. Chairman and President, Lim, to file an action for injunction and
damages against Ramos, et al., before the Regional Trial Court of Manila,
Branch 46 (RTC-Manila), docketed as Civil Case No. 09-122149
• Pending the injunction case, Cu resold his shares of stock in GDITI to Basalo for
a consideration of 60,000,000.00, as evidenced by an Agreement dated April 30,
2010 (April 30,2010 Agreement). Under the said agreement, Cu sold not only his
remaining 1,997 shares of stock in GDITI, but also the shares of stock subject of
the previously-executed Deed of Conditional Sale in favor of Ramos, as well as
the Deed of Sale in favor of Lim, Ong, and Gunnacao, where the respective
considerations were not paid
ISSUE
The issue for the Court’s resolution is whether or not the CA committed grave abuse of
discretion in denying Tom’s prayer for the issuance of a TRO and/or writ of preliminary
injunction.
RULING
• In an Order dated November 13, 2013, the RTC-Nabunturan granted Rodriguez’s
application for the issuance of a writ of preliminary mandatory injunction,
conditioned on the filing of a bond in the amount of P1,000,000.00. It found
 credence in the MOA... executed between him and Basalo which remained
uncontroverted
• In a Resolution[34] dated May 16, 2014, the CA, without touching upon the
merits of the case, denied Tom’s prayer for the issuance of a TRO and/or writ of
preliminary injunction, finding no extreme urgency on the matter raised by Tom,
and that no clear and... irreparable injury would be suffered if the injunctive writ
was not granted
• The petition is meritorious.
• SEC. 23. The board of directors or trustees. – Unless otherwise provided in this
Code, the corporate powers of all corporations formed under this Code shall be
exercised, all business conducted and all property of such corporations
controlled and held by... 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.
• Every director must own at least one (1) share of the capital stock of the
corporation of which he is a director, which share shall stand in his name on the
books of the corporation. Any director who ceases to be the owner of at least one
(1) share of the capital stock of the... corporation of which he is a director shall
thereby cease to be a director. Trustees of non-stock corporations must be
members thereof. A majority of the directors or trustees of all corporations
organized under this Code must be residents of the Philippines. (Emphasis and...
underscoring supplied)
• Accordingly, it cannot be doubted that the management and control of GDITI,
being a stock corporation, are vested in its duly elected Board of Directors, the
body that: (1) exercises all powers provided for under the Corporation Code; (2)
conducts all business of the... corporation; and (3) controls and holds all property
of the corporation. Its members have been characterized as trustees or directors
clothed with a fiduciary character.
• Tom has legal standing to seek the issuance of an injunctive writ, considering
that he is the original party-defendant in the specific performance case pending
before the RTC-Nabunturan from which this petition arose, and in which
Rodriguez merely intervened.
• WHEREFORE, the petition is GRANTED.
FILIPINAS PORT SERVICES, INC. VS GO, G.R. NO. 161886, 16 MARCH 2007
FACTS
• FilPort is a domestic corporation engaged in stevedoring services with
principal office in Davao City. In 1992, petitioner Eliodoro Cruz, Filport’s
president from 1968 he lost his bid for re-election as Filport’s president
during the general stockholders’ meeting in 1991, wrote a letter to the
corporation’s Board of Directors questioning the board’s creation of the positions
of Assistant Vice-Presidents for Corporate Planning, Operations, Finance and
Administration, and the creation of the additional positions of Special Assistants
to the President and the Board Chairman with a monthly remuneration of
P13,050.00 each, and the election thereto of certain members of the board.
• In his aforesaid letter, Cruz requested the board to take necessary action/s to
recover from those elected the salaries they have received. However, it was not
shown on the records that action was taken.
• In 1993, Cruz, purportedly in representation of Filport and its stockholders,
among which is herein co-petitioner Mindanao Terminal and Brokerage Services,
Inc., filed with the SEC a petition which he describes as a derivative suit against
the herein respondents who were then the incumbent members of Filport’s Board
of Directors, for alleged acts of mismanagement detrimental to the interest
of the corporation and its shareholders at large.
• With the enactment of R.A. No. 8799, the case was first turned over to the RTC
of Manila, Branch 14, sitting as a corporate court. Thereafter, on respondents’
motion, it was eventually transferred to the RTC of Davao City.
• RTC-Davao City rendered its decision in the case. Even as it found that (1)
Filport’s Board of Directors has the power to create positions not provided for in
the by-laws of the corporation since the board is the governing body; and (2) the
increases in the salaries of the board chairman, vice-president, treasurer and
assistant general manager are reasonable, the trial court nonetheless rendered
judgment against the respondents by ordering the directors holding the positions
of Assistant Vice President for Corporate Planning, Special Assistant to the
President and Special Assistant to the Board Chairman to refund to the
corporation the salaries they have received as such officers “considering that
Filipinas Port Services is not a big corporation requiring multiple executive
positions” and that said positions “were just created for accommodation.”
• On appeal, the CA taking exceptions to the findings of the trial court that the
creation of the positions of Assistant Vice President for Corporate Planning,
Special Assistant to the President and Special Assistant to the Board Chairman
was merely for accommodation purposes, granted the respondents’ appeal,
reversed and set aside the appealed decision of the trial court and accordingly
dismissed the so-called derivative suit filed by Cruz, et al. Hence this petition for
review on certiorari.
ISSUE
Whether or not Filport’s Board of Directors has the power to create positions not
provided for in the by-laws of the corporation.
RULING
• The governing body of a corporation is its board of directors.
• Section 23 of the Corporation Code explicitly provides that unless otherwise
provided therein, the corporate powers of all corporations formed under the Code
shall be exercised, all business conducted and all property of the corporation
shall be controlled and held by a board of directors. Thus, with the exception only
of some powers expressly granted by law to stockholders (or members, in case
of non-stock corporations), the board of directors (or trustees, in case of non-
stock corporations) has the sole authority to determine policies, enter into
contracts, and conduct the ordinary business of the corporation within the scope
of its charter, i.e., its articles of incorporation, by-laws and relevant provisions of
law. Verily, the authority of the board of directors is restricted to the management
of the regular business affairs of the corporation, unless more extensive power is
expressly conferred.
• In the present case, the board’s creation of the positions of Assistant Vice
Presidents for Corporate Planning, Operations, Finance and Administration, and
those of the Special Assistants to the President and the Board Chairman, was in
accordance with the regular business operations of Filport as it is authorized to
do so by the corporation’s by-laws, pursuant to the Corporation Code.
• Unfortunately, the bylaws of the corporation are silent as to the creation by its
board of directors of an executive committee. Under Section 35 of the
Corporation Code, the creation of an executive committee must be provided for
in the bylaws of the corporation. Notwithstanding the silence of Filport’s bylaws
on the matter, the creation of the executive committee by the board of directors
cannot be ruled as illegal or unlawful. One reason is the absence of a showing as
to the true nature and functions of said executive committee considering that the
“executive committee,” referred to in Section 35 of the Corporation Code which is
as powerful as the board of directors and in effect acting for the board itself,
should be distinguished from other committees which are within the competency
of the board to create at anytime and whose actions require ratification and
confirmation by the board. Another reason is that, ratiocinated by both the 2
courts below, the Board of Directors has the power to create positions not
provided for in Filport’s bylaws since the board is the corporation’s governing
body, clearly upholding the power of its board to exercise its prerogatives in
managing the business affairs of the corporation.
 FRANCISCO EIZMENDI, JR. VS TEODORICO FERNANDEZ, G.R. NO. 215280, 05
SEPTEMBER 2018
FACTS
• On November 28, 2013, respondent Teodorico P. Fernandez filed a Complaint
for Invalidation of Corporate Acts and Resolutions with Application for Writ
of Preliminary Injunction against the individual petitioners, namely:
Francisco C. Eizmendi Jr., Jose S. Tayag Jr., Joaquin San Agustin, Eduardo
Francisco, Edmidio Ramos, Jr., Albert Blancaflor, Rey Nathaniel Ifmung, Manuel
Acosta Jr., who allegedly constituted themselves as new members of the
Board of Directors (BOD) of Valle Verde Country Club, Inc. (VVCCI), despite
lack of quorum during the annual members' meeting on February 23, 2013.
• VVCCI is a duly organized non-stock corporation engaged in promoting sports,
recreational and social activities, and the operation and maintenance of a sports
and clubhouse, among other matters.
• Fernandez averred that the individual petitioners held a meeting on
October 18, 2013 during which they supposedly acted for and in behalf of
VVCCI, and found him guilty of less serious violations of the by-laws and
imposed on him the penalty of suspension of membership for six (6). He asserted
that since petitioners were not validly constituted as the new BOD in the place of
the hold-over BOD of VVCCI, they had no legal authority to act as such BOD, to
find him guilty and to suspend him. He added that he was not accorded due
process, as petitioners failed to give him opportunity to defend himself by
notifying him of the charge and the verdict against him.
• Fernandez prayed that after hearing on the merits, judgment be rendered:
(a) making the injunction permanent; (b) invalidating the claims of the individual
petitioners to the office of director of the VVCCI;(c) nullifying the annual
members' meeting on February 23, 2013, as well as subsequent board meetings
similarly held and conducted by the individual petitioners, including resolutions
and measures approved thereat, particularly those which are related to his
suspension from the VVCCI;(d) ordering the individual petitioners, jointly and
severally,to pay him ₱500,000.00 as attorney's fees and not less than
₱500,000.00 as exemplary damages, and ₱500,000.00 as moral damages.
• In an Urgent Motion or Request for Production/Copying of Documents,
Fernandez cited Rule 27 of the Rules of Court and requested the VVCCI, as
owner and custodian of corporate documents, to produce them and allow
him to copy the matters in connection with the hearing of his application
for issuance of a writ of preliminary injunction. Petitioners opposed the
Urgent Motion or Request for Production/Copying of Documents, and prayed that
it be denied for lack of merit, for being unreasonable and for not being in their
possession.
• During the hearing, Judge Maria Rowena San Pedro of RTC of Pasig Branch
158 stressed that she will not touch on the election contest aspect of the
 Complaint, but only on the issue of his suspension from the VVCCI.
Petitioners filed their Answer with Counterclaim and Grounds for
Dismissal.6Petitioners specifically denied the material allegations of Fernandez's
Complaint, and sought the dismissal thereof on the following grounds: (1) he has
no cause of action against the individual petitioners who acted as membersof the
BOD of VVCCI which is a collegial body; (2) the case is an election contest filed
more than 15 days from the date of election, in violation of Section 3, Rule 6 of
the Rules Governing Intra-Corporate Controversies; (3) non-exhaustion of intra-
corporate remedies and non-compliance with condition precedent under the By-
Laws of VVCCI; and (4) violation of rules on notarial practice.
• In an Order, the RTC pointed out that the application of a Writ of Preliminary
Injunction has been rendered moot. The RTC also reminded the parties that
it shall not entertain any issue respecting the February 23, 2013 elections;
otherwise, the mandatory period within which to file an Election Contest would be
rendered nugatory. The trial court stressed that is cannot allow indirectly what is
barred directly by the Rules and, accordingly, the only issue remaining is whether
due process was observed in suspending Fernandez. Also in a Resolution, the
RTC denied the Urgent Motion or Request for Production/Copying of
Documents.
• Aggrieved by the RTC Order and Resolution, Fernandez filed a petition
forcertioraribefore the CA.
• In its decision, the CA granted Fernandez's petition for certiorari, nullified and set
aside the assailed Order and Resolution of the RTC insofar as it did not allow
any evidence to be presented relating to the February 23, 2013 elections of the
board of directors of VVCCI. The CA ruled that in order to fully resolve the issue
regarding the legality of the suspension of Fernandez from VVCCI, it was also
necessary for the trial court to admit pieces of evidence which relate to the
composition of the BOD of VVCCI during the time when the penalty of
suspension from club membership was imposed upon petitioner.
ISSUE
Whether or not Fernandez may question the authority of the petitioners to act as the
BOD of VVCCI and approve the board resolution suspending his club membership.
RULING
• To allow Fernandez to indirectly question the validity of the February 23, 2013
election would be a clear violation of the 15-day reglementary period to file an
election contest under the Interim Rules.
• The Court agrees with Fernandez that the 15-day reglementary period
within which to file an election contest under the Interim Rulesis meant to
hasten the submission and resolution of corporate election controversies,
so that the state of uncertainty in the corporate leadership is settled; and that the
said period not meant to block suits questioning the unlawful acts of winning
 directors, including the legitimacy of theirauthority. However, if the Court were to
entertain one of the causes of action in Fernandez's complaint, which is partly an
election contest raised beyond the said reglementary period, then the salutary
purposes of the said period under theInterim Ruleswould be rendered futile; the
floodgates to election contests would be opened, to the detriment of the regime
of efficient and stable corporate governance.
• The RTC committed no grave abuse of discretion in disallowing Fernandez from
presenting evidence during the hearing of his application for preliminary
injunction, relative to the lack of authority of the individual petitioners to suspend
him because it would inevitably question the validity of the February 23, 2013
election.
• The RTC's action of virtually dismissing the first cause of action in Fernandez's
complaint for being an election contest filed beyond the 15-day reglementary
period, is indeed consistent with the following provisions of theInterim Rules: (a)
Section 3, Rule 1, because such act promotes the objective of securing a just,
summary, speedy and inexpensive determination of every action or proceeding;
and (b) Section 4, Rule 6, which authorizes the court to dismiss outright the
complaint if the allegations thereof is not sufficient inform and substance.
• The RTC's action is, likewise, consistent with the inherent power of courts to
amend and control its process and orders so as to make them conformable to
law and justice, under Section 5, Rule 135 of the Rules of Court.In sum, the
CAgravely erred in allowing Fernandez to present evidence in connection with
the election of the individual petitioners as members of the BOD of VVCCI
conducted on February 23, 2013 to invalidate their claims to the office of director,
because that is akin to entertaining an election contest filed beyond the 15-day
period under theInterim Rules.
 BERNAS VS. CINCO, G.R. NO. 163356-57, 10 JULY 2015
FACTS

• Jose A. Bernas (Bernas), Cecile H. Cheng, Victor Africa, Jesus Maramara, Jose
T. Frondoso, Ignacio T. Macrohon and Paulino T. Lim (Bernas Group)... among
the Members of the Board of Directors and Officers of the corporation... terms
were... to expire either in 1998 or 1999.
• Jovencio Cinco, Ricardo Librea and Alex Y. Pardo (Cinco Group) are the
members and stockholders of the corporation who were elected Members of the
Board of Directors and Officers of the club during the 17 December 1997 Special
Stockholders.
• Alarmed with the rumored anomalies in handling the corporate funds, the MSC
Oversight Committee (MSCOC), composed of the past presidents of the
club, demanded from the Bernas Group, who were then incumbent officers
of the corporation, to resign from their respective positions... the
stockholders of the corporation representing at least 100 shares who sought the
assistance of the MSCOC to call for a special stockholders meeting for the
purpose... of removing the sitting officers and electing new ones
• For failure of the Bernas Group to secure an injunction before the
Securities Commission (SEC), the meeting proceeded... were... removed
from office and, in their place and stead, Jovencio F. Cinco, Ricardo G. Librea,
Alex Y. Pardo, Roger T. Aguiling, Rogelio G. Villarosa, Armando David, Norberto
Maronilla, Regina de Leon-Herlihy and Claudio B. Altura, were elected.
• the Bernas Group initiated an action before the Securities Investigation and
Clearing Department (SICD) of the SEC... seeking for the nullification of the 17
December 1997 Special Stockholders Meeting on the ground that... it was
improperly called.
• Citing Section 28 of the Corporation Code, the Bernas Group argued that the
authority to call a meeting lies with the Corporate Secretary and not with
the MSCOC which functions merely as an oversight body and is not vested
with the power to call... corporate meetings. The Cinco Group insisted that
the 17 December 1997 Special Stockholders’ Meeting is sanctioned by the
Corporation Code and the MSC by-laws.
• Meanwhile, the newly elected directors initiated an investigation on the alleged
anomalies in administering the corporate affairs and after finding Bernas guilty of
irregularities,[10] the Board resolved to expel him from the club by selling his
shares at... public auction.
• 1998, During the said meeting, which was attended by 1,017 stockholders
representing 2/3 of the outstanding... shares, the majority resolved to approve,
confirm and ratify, among others, the calling and holding of 17 December 1997
Special Stockholders’ Meeting, the acts and resolutions adopted therein including
the removal of Bernas Group from the Board and the election of their...
replacements.[14]... the SEC En Banc, in its Decision[15] dated 30 March
 1999,... resolved to supervise the holding of the 1999 Annual Stockholders’
Meeting. During the said meeting, the stockholders once again approved, ratified
and confirmed the holding of the 17 December 1997 Special Stockholders’
Meeting. Likewise, ratified by the stockholders during the 2000 Annual
Stockholders’ Meeting which was held on 17 April 2000.
• 17 December 1997 Special Stockholders’ Meeting and the Annual Stockholders’
Meeting conducted on 20 April 1998 and 19 April 1999 are invalid.
ISSUE
Whether or not the honorable court of appeals erred in ruling that the 17 december
1997 special stockholders’ meeting is invalid
RULING
• Textually, only the President and the Board of Directors are authorized by
the by-laws to call a special meeting. In cases where the person authorized
to call a meeting refuses, fails or neglects to call a meeting, then the
stockholders representing at least 100 shares,... upon written request, may
file a petition to call a special stockholder’s meeting.
• In the instant case, there is no dispute that the 17 December 1997 Special
Stockholders’ Meeting was called neither by the President nor by the Board of
Directors but by the MSCOC. While the MSCOC, as its name suggests, is
created for the purpose of overseeing the affairs... of the corporation, nowhere in
the by-laws does it state that it is authorized to exercise corporate powers, such
as the power to call a special meeting, solely vested by law and the MSC by-laws
on the President or the Board of Directors.
• Relative to the powers of the Board of Directors, nowhere in the Corporation
Code or in the MSC by-laws can it be gathered that the Oversight Committee is
authorized to step in wherever there is breach of fiduciary duty and call a special
meeting for the purpose of removing the... existing officers and electing their
replacements even if such call was made upon the request of shareholders.
Needless to say, the MSCOC is neither empowered by law nor the MSC by-laws
to call a meeting and the subsequent ratification made by the stockholders did
not cure... the substantive infirmity, the defect having set in at the time the void
act was done. The defect goes into the very authority of the persons who
made the call for the meeting. It is apt to recall that illegal acts of a
corporation which contemplate the doing of an... act which is contrary to
law, morals or public order, or contravenes some rules of public policy or
public duty, are, like similar transactions between individuals, void.[30]
They cannot serve as basis for a court action, nor acquire validity by...
performance, ratification or estoppel.[31] The same principle can apply in the
present case. The void election of 17 December 1997 cannot be ratified by the
subsequent Annual Stockholders’ Meeting.
• such Special Stockholders’ Meeting called by the Oversight Committee cannot
have any legal effect. The removal of the Bernas Group, as well as the election
of the Cinco Group, effected by the assembly in that improperly called meeting is
void, and since the

• Cinco Group has no legal right to sit in the board, their subsequent acts of
expelling Bernas from the club and the selling of his shares at the public auction,
are likewise invalid.

• The Cinco Group cannot invoke the application of de facto officership

doctrine to justify the actions taken after the invalid election since the
operation of the principle is limited to third persons who were originally not part of
the corporation but became such by... reason of voting of government-
sequestered shares.
 WESTERNINSTITUTE OF TECHNOLOGY, INC. VS, SALAS G.R. NO. 113032, 21
AUGUST 1997
FACTS
• Private respondents are the majority and controlling members of the Board
of Trustees of Western Institute of Technology, Inc. a stock corporation
engaged in the operation, among others, of an educational institution
• Then, the board of directors amended their by laws giving the members of
board of directors a compensation. The ten per centum of the net profits shall
be distributed equally among the ten members of the Board of Trustees.
• Few years later, the private respondents were charged of falsification of
public documents and estafa. The charge for falsification of public document
was anchored on the private respondents’ submission of WIT’s income statement
for the fiscal year 1985-1986 with the Securities and Exchange Commission
(SEC) reflecting therein the disbursement of corporate funds making it appear
that the same was passed by the board on March 30, 1986, when in truth, the
same was actually passed on June 1, 1986, a date not covered by the
corporation’s fiscal year 1985-1986.
• After a full-blown hearing TC handed down a verdict of acquittal on both counts
without imposing any civil liability against the accused therein.
ISSUES
WON the compensation of the board of directors as stated in their by laws violates the
corporation code?
RULING
NO. There is no argument that directors or trustees, as the case may be, are not
entitled to salary or other compensation when they perform nothing more than the usual
and ordinary duties of their office. This rule is founded upon a presumption that
directors/trustees render service gratuitously, and that the return upon their shares
adequately furnishes the motives for service, without compensation.
Under the foregoing section, there are only two (2) ways by which members of the
board can be granted compensation apart from reasonable per diems: (1) when
there is a provision in the by-laws fixing their compensation; and (2) when the
stockholders representing a majority of the outstanding capital stock at a regular or
special stockholders’ meeting agree to give it to them. In the case at bench, Resolution
No. 48, s. 1986 granted monthly compensation to private respondents not in their
capacity as members of the board, but rather as officers of the corporation, more
particularly as Chairman, Vice-Chairman, Treasurer and Secretary of Western Institute
of Technology. Clearly, therefore, the prohibition with respect to granting compensation
to corporate directors/trustees as such under Section 30 is not violated in this particular
case.
 MARK II MARKETING, INC. VS, JOSON, G.R. NO. 171993, 12 DECEMBER 2011
FACTS
• Before petitioner corporation was officially incorporated, respondent has
already been engaged by petitioner Lucila, in her capacity as President of Marc
Marketing, Inc., to work as the General Manager of petitioner corporation.
Petitioner corporation was officially incorporated and registered with the
SEC. Accordingly, Marc Marketing, Inc. was made non-operational.
Respondent continued to discharge his duties as General Manager but this time
under petitioner corporation.
• Petitioner corporations Board of Directors conducted a meeting where
respondent was appointed as one of its corporate officers with the
designation or title of General Manager to function as a managing director with
other duties and responsibilities that the Board of Directors may provide and
authorized.
• Nevertheless, on 30 June 1997, petitioner corporation decided to stop and
cease its operations due to poor sales collection aggravated by the
inefficient management of its affairs. On the same date, it formally informed
respondent of the cessation of its business operation. Concomitantly,
respondent was apprised of the termination of his services as General Manager
since his services as such would no longer be necessary for the winding up of its
affairs.
• Feeling aggrieved, respondent filed a Complaint for Reinstatement and
Money Claim against petitioners before the Labor Arbiter. Labor Arbiter
rendered his Decision in favor of respondent. Aggrieved, petitioners appealed the
aforesaid Labor Arbiters Decision to the NLRC.
• NLRC ruled in favor of petitioners by giving credence to the Secretarys
Certificate, which evidenced petitioner corporations Board of Directors
meeting in which a resolution was approved appointing respondent as its
corporate officer with designation as General Manager. Therefrom, the
NLRC reversed and set aside the Labor Arbiters Decision and dismissed
respondents Complaint for want of jurisdiction.
• When respondents Motion for Reconsideration was denied, he filed a
Petition for Certiorari with the Court of Appeals ascribing grave abuse of
discretion on the part of the NLRC. Court of Appeals rendered its now assailed
Decision declaring that the Labor Arbiter has jurisdiction over the present
controversy. It upheld the finding of the Labor Arbiter that respondent was a mere
employee of petitioner corporation, who has been illegally dismissed from
employment without valid cause and without due process.
ISSUES
Whether or not respondent was a mere employee of petitioner corporation, who has
been illegally dismissed from employment without valid cause and without due process
Consequently, whether or not NLRC has jurisdiction over the instant case?
RULING
While Article 217(a)2 of the Labor Code, as amended, provides that it is the Labor
Arbiter who has the original and exclusive jurisdiction over cases involving termination
or dismissal of workers when the person dismissed or terminated is a corporate officer,
the case automatically falls within the province of the RTC. The dismissal of a corporate
officer is always regarded as a corporate act and/or an intra-corporate controversy.

Under Section 5 of Presidential Decree No. 902-A, intra-corporate controversies are

those controversies arising out of intra-corporate 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.It
also includes controversies in the election or appointments of directors, trustees,officers
or managers of such corporations, partnerships or associations.
• The aforesaid Section 25 of the Corporation Code, particularly the phrase
"such other officers as may be provided for in the by-laws," has been
clarified and elaborated in this Courts recent pronouncement in Matling
Industrial and Commercial Corporation v. Coros.
• An "office" is created by the charter of the corporation and the officer is
elected by the directors or stockholders. On the other hand, an employee
occupies no office and generally is employed not by the 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.
• This interpretation is the correct application of Section 25 of the Corporation
Code, which plainly states that the corporate officers are the President,
Secretary, Treasurer and such other officers as may be provided for in the
[b]y-[l]aws. Accordingly, the corporate officers in the context of PD No. 902-A
are exclusively those who are given that character either by the Corporation
Code or by the corporations [b]y[l]aws.
• It is also of no moment that respondent, being petitioner corporations General
Manager, was given the functions of a managing director by its Board of
Directors. As held in Matling, the only officers of a corporation are those given
that character either by the Corporation Code or by the corporate by-laws. It
follows then that the corporate officers enumerated in the by-laws are the
exclusive officers of the corporation while the rest could only be regarded as
 mere employees or subordinate officials.Respondent, in this case, though
occupying a high ranking and vital position in petitioner corporation but which
position was not specifically enumerated or mentioned in the latters by-laws, can
only be regarded as its employee or subordinate official.
• That respondent was also a director and a stockholder of petitioner
corporation will not automatically make the case fall within the ambit of
intra-corporate controversy and be subjected to RTCs jurisdiction. To
reiterate, not all conflicts between the stockholders and the corporation are
classified as intra-corporate. Other factors such as the status or relationship of
the parties and the nature of the question that is the subject of the controversy
must be considered in determining whether the dispute involves corporate
matters so as to regard them as intra-corporate controversies. As previously
discussed, respondent was not a corporate officer of petitioner corporation but a
mere employee thereof so there was no intra-corporate relationship between
them. With regard to the subject of the controversy or issue involved herein, i.e.,
respondents dismissal as petitioner corporations General Manager, the same did
not present or relate to an intra-corporate dispute.

• With all the foregoing, this Court is fully convinced that, indeed,
respondent, though occupying the General Manager position, was not a
corporate officer of petitioner corporation rather he was merely its
employee occupying a high-ranking position.
• Accordingly, respondents dismissal as petitioner corporations General
Manager did not amount to an intra-corporate controversy. Jurisdiction
therefor properly belongs with the Labor Arbiter and not with the RTC.
• In termination cases, the burden of proving just and valid cause for dismissing an
employee from his employment rests upon the employer. The latter's failure to
discharge that burden would necessarily result in a finding that the dismissal is
unjustified.
 DEVELOPMENT BANK OF THE PHILIPPINES VS. STA. INES MELALE FOREST
PRODUCTS CORPORATION G.R. NO. 193068, 01 FEBRUARY 2017
FACTS
• Sometime in 1977, National Galleon Shipping Corporation (Galleon),
formerly known as Galleon Shipping Corporation, was organized to operate a
liner service between the Philippines and it’s … trading partners. Galleon’s major
stockholders were Sta. Ines Melale Forest Products Corporation (Sta. Ines),
Cuenca Investment Corporation (Cuenca Investment), Universal Holdings
Corporation (Universal Holdings), Galleon’s President Rodolfo M. Cuenca
(Cuenca), Manuel I. Tinio (Tinio), and the Philippine National Construction
Corporation (PNCC).
• Galleon experienced financial difficulties and had to take out several loans
from different sources such as foreign financial institutions, its
shareholders (Sta. Ines, Cuenca Investment, Universal Holdings, Cuenca, and
Tinio), and other entities “with whom it had ongoing commercial relationships.”
• DBP guaranteed Galleon’s foreign loans. In return, Galleon and its
stockholders Sta. Ines, Cuenca Investment, Universal Holdings, Cuenca, and
Tinio, executed a Deed of Undertaking on October 10, 1979 and obligated
themselves to guarantee DBP’s potential liabilities.
• To secure DBP’s guarantee, Galleon undertook to secure a first mortgage on
its five new vessels and two second-hand vessels. However, despite the
loans extended to it, Galleon’s financial condition did not improve.”
Cuenca, as Galleon’s president, wrote to the members of the Cabinet
Standing Committee “for the consideration of a policy decision to support
a liner service.” Cuenca also wrote then President Ferdinand Marcos and
asked for assistance.
• On July 21, 1981, President Marcos issued Letter of Instructions No. 115518
addressed to the NDC, DBP, and the Maritime Industry Authority a Letter of
Instructions directing a rehabilitation plan for Galleon Shipping
Corporation.
• On August 10, 1981, pursuant to that Letter of Instructions No. 1155,
Galleon’s stockholders, represented by Cuenca, and NDC, through its then
Chairman of the Board of Directors, Roberto V. Ongpin entered into a
Memorandum of Agreement, where NDC and Galleon undertook to prepare
and signed a share purchase agreement covering 100% of Galleon’s equity
for ₱46,740,755.00. The purchase price was to be paid after five years from the
execution of the share purchase agreement. The share purchase agreement also
provided for the release of Sta. Ines, Cuenca, Tinio and Construction
Development Corporation of the Philippines from the personal counter-
guarantees they issued in DBP’s favor under the Deed of Undertaking.
ISSUE:
1. Whether or not the Memorandum of Agreement obligates NDC to purchase Galleon’s
shares of stocks and pay the advances made by respondents in Galleon’s favor;
2. Whether or not the Memorandum of Agreement novated the Deed of Undertaking
executed between DBP and respondents; and
3. Whether or not the computation of legal interest should be at the rate of 6% per
annum, instead of the 12% per annum pegged by the Court of Appeals.70
RULING:
• The court declared Sta. Ines Melale Forest Products Corporation, Rodolfo M.
Cuenca, Manuel I. Tinio, Cuenca Investment Corporation, Universal Holdings
Corporation, and the Philippine National Construction Corporation LIABLE to the
National Development Corporation, the Development Bank of the
Philippines, and the Asset Privatization Trust under the deed of
undertaking, pledge, mortgages, and other accessory contracts among the
parties.
• The Court of Appeals found that the Memorandum of Agreement between NDC
and Galleon was a perfected contract for NDC to purchase 100% of Galleon’s
shareholdings. However, a careful reading of the Memorandum of Agreement
shows that what the parties agreed to was the execution of a share
purchase agreement to effect the transfer of 100% of Galleon’s
shareholdings to NDC. DBP’s claims for damages are denied since it failed to
support its claims of malicious prosecution and a deliberate act of Sta. Ines,
Cuenca, Tinio, Cuenca Investment, and Universal Holdings to cause loss or
injury to DBP.
• The court held further that the award of the advances made by Sta. Ines Melale
Forest Products Corporation, Rodolfo M. Cuenca, Manuel L. Tinio, Cuenca
Investment Corporation, and Universal Holdings Corporation in Galleon’s favour,
as well as the award of the payment for their shares of stocks in Galleon, shall
earn an interest rate of 12% per annum from the date of the filing of this case on
April 22, 1985 until June 30, 2013, after which, they shall earn interest at the rate
of 6% per annum until the Decision becomes final and executor, These amounts
shall earn interest at the rate of 6% per annum from the finality of this Decision
until its satisfaction.
LapuLapu Foundation, Inc. vs. Court of Appeals, G.R. No. 126006, 29 January 2004

FACTS: Respondent bank filed an immediate collection case against the Petitioner
Foundation and former president Tan failing to pay four matured loan as evidenced by
Tan’s signed promissory note as president of the Foundation.

In disclaiming any liability for the loans, the petitioner Foundation insists that said loans
were contracted by personal capacity of Tan. On the other hand, while admitting that the
loans were his personal obligation, Tan argue that the same is not yet due as he had an
unwritten agreement with the respondent Bank that the loans would be renewed/extended
on a year-to-year basis/annual and paid from the proceeds of his shares of stock in the
Lapulapu Industries Corp.

Trial Court ruled petitioners are accountable to the bank solidarily. On appeal, the
CA affirmed the judgment of the court a quo. CA dismissed the argument of petitioner
Tan that there was an unwritten argument between him and the respondent bank to pay
loans on the proceeds of his shares in Lapulapu Industries Corp.

ISSUE: Whether or not an alleged unwritten agreement between the creditor and the
debtor which is not reflected on the promissory note (PN) evidencing the loan is
admissible in evidence in addition to the terms of the PN

HELD: The answer is in the negative. The parol evidence rule likewise constrains this
Court to reject petitioner Tans claim regarding the purported unwritten agreement
between him and the respondent Bank on the payment of the obligation. Section 9, Rule
130 of the of the Revised Rules of Court provides that when the terms of an agreement
have been reduced to writing, it is to be considered as containing all the terms agreed
upon and there can be, between the parties and their successors-in-interest, no evidence
of such terms other than the contents of the written agreement. In this case, the
promissory notes are the law between the petitioners and the respondent Bank. Nowhere
was it stated therein that they would be renewed on a year-to-year basis or rolled-over
annually until paid from the proceeds of petitioner Tans shares in the Lapulapu Industries
Corp. Accordingly, this purported unwritten agreement could not be made to vary or
contradict the terms and conditions in the promissory notes. Evidence of a prior or
contemporaneous verbal agreement is generally not admissible to vary, contradict or
defeat the operation of a valid contract. While parol evidence is admissible to explain the
meaning of written contracts, it cannot serve the purpose of incorporating into the contract
additional contemporaneous conditions which are not mentioned at all in writing, unless
there has been fraud or mistake. No such allegation had been made by the petitioners in
this case

Advance Paper Corporation vs. Arma Traders Corporation, G.R. No. 176897, 11
December 2013

Facts: Advance paper is a domestic corporation engaged in the business of producing,

printing, manufacturing, distributing and selling of various paper products. Arma traders
is also a domestic corporation engaged in the wholesale and distribution of school and
office supplies and novelty products where Antonio Tan (Tan) was formerly the president
while Uy Seng Kee Willy (Uy) is the treasurer. They represented Arma Traders when
dealing with its supplier, Advance Paper, for about 14 years. From September to
December 1994, Arma Traders purchased on credit, paper products amounting to 7.5
million from Advance Paper. Because of Arma Trader's good relations with Advance
Paper, Uy and Tan was able to obtain loans from Advance Paper amounting to 7.7 million
in order to pay their obligation tother suppliers. Tan and Uy issued postdated checks
payable to cash to Advance Paper with an aggregate amount of 15.2 million pesos.
Advance Paper presented the checks to drawee bank but were dishonored either
because "insufficient funds" or "account closed". Arma Traders failed to settle its account
with Advance Paper on December 29, 1994, the petitioners filed acomplaint for collection
of sum of money with application for preliminary attachment against Arma Trader. The
petitioners claimed that the 5 respondents fraudulently issued the postdated checks as
payment for the purchases and loan transactions knowing that they did not have sufficient
funds with the drawee banks. Arma Traders led the petitioners to believe that Tan and Uy
had the authority to obtain loans since the respondents left the active and sole
management of the company to Tan and Uy since 1984.According to the respondent, the
loan transactions were ultra vires because the board of directors of Arma Traders did not
issue a board resolution authorizing Tan and Uy to obtain the loans from Advance Paper.
They claimed that the borrowing of money must be done only with the prior approval of
the board of directors because without the approval, the corporate officers are acting in
excess of their authority of ultra vires. RTC ruled in favor of Advance Paper. CA reversed
the decision.

Issue: Whether Arma Traders is liable to pay the loans applying the doctrine of apparent
authority

Ruling: Arma Traders is liable to pay the loans on the basis of the doctrine of apparent
authority which provides that a corporation is estopped from denying the agent's authority
if it knowingly permits one of its officers or any agent to act within the scope of an apparent
authority, and it holds him out of the public as possessing the power to do those acts. A
corporate officer or agent may represent and bind the corporation in transactions with
third persons to the extent that the authority to do so has been conferred upon him, and
this includes powers as, in the actual course of the particular business, are incidental to,
or may be applied from, the powers intentionally conferred, powers added by custom and
usage, as usually pertaining to the particular officer or agent, and such apparent powers
as the corporation has caused person dealing with the officer or agent to believe that is
was conferred. In the present petition the SC do not agree with the CA's findings that
Arma Traders is not liable to pay the loans due to the lack of board resolution authorizing
Tan and Uy to obtain the loans.
Mactan Rock Industries, Inc. vs. Germo, G.R. No. 228799, 10 January 2018

Fact: This case stemmed from a Complaint for sum of money and damages filed by
Germo against MRII – a domestic corporation engaged in supplying water, selling
industrial maintenance chemicals, and water treatment and chemical cleaning services -
and its President/Chief Executive Officer (CEO), Tompar. The complaint alleged that,
MRII, through Tompar, entered into a Technical Consultancy Agreement (TCA) with
Germo, whereby the parties agreed, that: (a) Germo shall stand as MRII's marketing
consultant who shall take charge of negotiating, perfecting sales, orders, contracts, or
services of MRII, but there shall be no employer-employee relationship between them;
and (b) Germo shall be paid on a purely commission basis, including a monthly allowance
of P5,000.00.

During the effectivity of the TCA, Germo successfully negotiated and closed with
International Container Terminal Services, Inc. (ICTSI) a supply contract of 700 cubic
meters of purified water per day. Accordingly, MRII commenced supplying water to ICTSI
on February 22, 2007, and in tum, the latter religiously paid MRII the corresponding
monthly fees. Despite the foregoing, MRII allegedly never paid Germo his rightful
commissions amounting to P2,225,969.56 as of December 2009, inclusive of interest.
Initially, Germo filed a complaint before the National Labor Relations Commission
(NLRC), but the same was dismissed for lack of jurisdiction due to the absence of
employer-employee relationship between him and MRII. He then filed a civil case before
the Regional Trial Court of Muntinlupa, Branch 256, but the same was dismissed without
prejudice to its re-filing due to his counsel's failure to mark all his documentary evidence
at the pre-trial conference. Hence, Germo filed the instant complaint praying that MRII
and Tompar be made to pay him the amounts of P2,225,969.56 as unpaid commissions
with legal interest from the time they were due until fully paid, P1,000,000.00 as moral
damages, P1,000,000.00 as exemplary damages, and the costs of suit.
 In their Answer, MRII and Tompar averred, among others, that: (a) there was no
employer-employee relationship between MRII and Germo as the latter was hired as a
mere consultant; (b) Germo failed to prove that the ICTSI account materialized through
his efforts as he did not submit the required periodic reports of his negotiations with
prospective clients; and (c) ICTSI became MRII's client through the efforts of a certain Ed
Fornes. Further, MRII and Tompar claimed that Germo should be made to pay them
litigation expenses and attorney's fees as they were compelled to litigate and engage the
services of counsel to protect their interest.

Due to MRII, Tompar, and their counsel's multiple absences at the various schedules for
pre-trial conference, the RTC considered them as "in default," thereby allowing Germo to
present his evidence ex-parte.

Summary: As to the merits of the case, the courts a quo correctly found that: (a) Germo
entered into a valid and binding TCA with MRII where he was engaged as a marketing
consultant; (b) aside from the P5,000.00 monthly allowance, Germo was going to be paid
on a purely commission basis; (c) during the effectivity of the TCA and in the performance
of his duties as marketing consultant of MRII, Germo successfully brokered MRII's
contract of services with ICTSI, obviously resulting in revenues in MRII's favor; (d) despite
the foregoing and demands from Germo, MRII refused to pay Germo's rightful
commission fees; and (e) MRII's refusal to pay Germo resulted – or at the very least,
contributed to – Germo's financial hardships.

Issue: The issue for the Court's resolution is whether or not the CA correctly upheld MRII
and Tompar's solidary liability to Germo.

Ruling: Be that as it may, the Court finds that the courts a quo erred in concluding that
Tompar, in his capacity as then-President/CEO of MRII, should be held solidarily liable
with MRII for the latter's obligations to Germo. It is a basic rule that a corporation is a
juridical entity which is vested with legal and personality separate and distinct from those
acting for and in behalf of, and from the people comprising it. As a general rule, directors,
officers, or employees of a corporation cannot be held personally liable for the obligations
incurred by the corporation, unless it can be shown that such director/officer/employee is
guilty of negligence or bad faith, and that the same was clearly and convincingly proven.
Thus, before a director or officer of a corporation can be held personally liable for
corporate obligations, the following requisites must concur: (1) the complainant must
allege in the complaint that the director or officer assented to patently unlawful acts of the
corporation, or that the officer was guilty of gross negligence or bad faith; and (2) the
complainant must clearly and convincingly prove such unlawful acts, negligence or bad
faith.[42] In this case, Tompar's assent to patently unlawful acts of the MRII or that his
acts were tainted by gross negligence or bad faith was not alleged in Germo's complaint,
much less proven in the course of trial. Therefore, the deletion of Tompar's solidary
liability with MRII is in order.

University of Mindanao, Inc. vs. Bangko Sentral ng Pilipinas, G.R. No. 194964-65,
11 January 2016

Facts:

University of Mindanao is an educational institution. For the year 1982, its Board of
Trustees was chaired by Guillermo B. Torres. His wife, Dolores P. Torres, sat as
University of Mindanao's Assistant Treasurer.

Guillermo B. Torres and Dolores P. Torres incorporated and operated two (2) thrift banks:
(1) First Iligan Savings & Loan Association, Inc. (FISLAI); and (2) Davao Savings and
Loan Association, Inc. (DSLAI).

Guillermo B. Torres chaired both thrift banks. He... acted as FISLAI's President, while his
wife, Dolores P. Torres, acted as DSLAI's President and FISLAI's Treasurer.

Bangko Sentral ng Pilipinas issued a P1.9 million standby emergency credit to FISLAI.
The release of standby emergency credit was evidenced by three (3) promissory notes
University of Mindanao's Vice President for Finance, Saturnino Petalcorin, executed a
deed of real estate mortgage over University of Mindanao's property in Cagayan de Oro
City... in favor of Bangko Sentral ng Pilipinas.

"The mortgage served as security for FISLAI's PI.9 Million loan" It was allegedly executed
on University of Mindanao's behalf.

As proof of his authority to execute a real estate mortgage for University of Mindanao,
Saturnino Petalcorin showed a Secretary's Certificate

MSLAI failed to recover from its losses and was liquidated on May 24, 1991.

On June 18, 1999, Bangko Sentral ng Pilipinas sent a letter to University of Mindanao,
informing it that the bank would foreclose its properties if MSLAI's total outstanding
obligation of P12,534,907.73 remained unpaid.

Gloria E. Detoya, denied that University of Mindanao's properties were mortgaged. It also
denied having received any loan proceeds from Bangko Sentral ng Pilipinas.

Petitioner argues that the execution of the mortgage contract was ultra vires. As an
educational institution, it may not secure the loans of third persons. Securing loans of
third persons is not among the purposes for which petitioner was... established.

Respondent argues that petitioner's act of mortgaging its properties to guarantee FISLAI's
loans was consistent with petitioner's business interests, since petitioner was presumably
a FISLAI shareholder whose officers and shareholders interlock with FISLAI. Respondent
points out... that petitioner and its key officers held substantial shares in MSLAI when
DSLAI and FISLAI merged. Therefore, it was safe to assume that when the mortgages
were executed in 1982, petitioner held substantial shares in FISLAI.

Petitioner argues that it did not authorize Saturnino Petalcorin to mortgage its properties
on its behalf. There was no board resolution to that effect. Thus, the mortgages executed
by Saturnino Petalcorin were unenforceable.
Issues:

whether petitioner University of Mindanao is bound by the real estate mortgage contracts
executed by Saturnino Petalcorin.

Ruling:

No. Acts of an officer that are not authorized by the board of directors/trustees do
not bind the corporation unless the corporation ratifies the acts or holds the officer out as
a person with authority to transact on its behalf.

Petitioner argues that it did not authorize Saturnino Petalcorin to mortgage its
properties on its behalf. There was no board resolution to that effect. Thus, the mortgages
executed by Saturnino Petalcorin were unenforceable. The mortgage contracts executed
in favor of respondent do not bind petitioner. They were executed without authority from
petitioner. Being a juridical person, petitioner cannot conduct its business, make
decisions, or act in any manner without action from its Board of Trustees. The Board of
Trustees must act as a body in order to exercise corporate powers. Individual trustees
are not clothed with corporate powers just by being a trustee. Hence, the individual trustee
cannot bind the corporation by himself or herself. The corporation may, however, delegate
through a board resolution its corporate powers or functions to a representative, subject
to limitations under the law and the corporation's articles of incorporation. The relationship
between a corporation and its representatives is governed by the general principles of
agency. Article 1317 of the Civil Code provides that there must be authority from the
principal before anyone can act in his or her name:

Hence, without delegation by the board of directors or trustees, acts of a person -

including those of the corporation's directors, trustees, shareholders, or officers—
executed on behalf of the corporation are generally not binding on the corporation. The
unenforceable status of contracts entered into by an unauthorized person on behalf of
another is based on the basic principle that contracts must be consented to by both
parties. There is no contract without meeting of the minds as to the subject matter and
cause of the obligations created under the contract. Consent of a person cannot be
presumed from representations of another, especially if obligations will be incurred as a
result. Thus, authority is required to make actions made on his or her behalf binding on a
person. Contracts entered into by persons without authority from the corporation shall
generally be considered ultra vires and unenforceable against the corporation

Alhambra Cigar vs. SEC, G.R. No. L-23606, 29 July 1968 [Doctrine of Relations or
Relating Back Doctrine]

FACTS: Alhambra Cigar and Cigarette Manufacturing Company, Inc. was duly
incorporated under Philippine laws on January 15, 1912. By its corporate articles it 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, entered into a state of liquidation.
Thereafter, a new corporation, Alhambra Industries, Inc., was formed to carry on the
business of Alhambra. On June 20, 1963, within Alhambra's three-year statutory period
for liquidation, RA 3531 was enacted into law. It amended Section 18 of the Corporation
Law empowering 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. Previous to RA 3531, the maximum non-extendible term of such corporations
was fifty years. On July 15, 1963, at a special meeting, 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.
Alhambra's articles of incorporation as so amended certified correct by its
president and secretary and a majority of its board of directors, were then filed with SEC.
SEC, however, returned said amended articles of incorporation to Alhambra's counsel
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."

ISSUE: Whether or not the corporate life of a corporation be extended during the period
of winding up or after its charter has already expired.
Ruliing: No. The common law rule, at the beginning, was rigid and inflexible in that upon
its dissolution, a corporation became legally dead for all purposes. Statutory
authorizations had to be provided for its continuance after dissolution “for limited and
specified purposes incident to complete liquidation of its affairs”. Thus, the moment a
corporation’s right to exist as an “artificial person” ceases, its corporate powers are
terminated “just as the powers of a natural person to take part in mundane affairs cease
to exist upon his death”. There is nothing left but to conduct, as it were, the settlement of
the estate of a deceased juridical person.

From July 15 to October 28, 1963, when Alhambra made its attempt to extend its
corporate existence, its original term of fifty years had already expired (January 15, 1962);
it was in the midst of the three-year grace period statutorily fixed in Section 77 of the
Corporation Law

The liquidation of the corporation's affairs set forth in Section 77 became necessary
precisely because its life had ended. For this reason alone, the corporate existence and
juridical personality of that corporation to do business may no longer be extended.

Section 77 - the privilege given to prolong corporate life under the amendment must be
exercised before the expiry of the term fixed in the articles of incorporation.

The Edward J. Nell Co. vs. Pacific Farms, Inc,, G.R. No. L-20850, 29 November
1965 [Nell Doctrine]
Lessons Applicable: Types of Acquisitions / Transfers (Corporate Law)

FACTS:

On October 9, 1958, appellant (Edward) secured in Civil Case No. 58579 of the Municipal
Court of Manila against Insular Farms, Inc. a judgment for the sum of P1,853.80 —
representing the unpaid balance of the price of a pump sold by appellant to Insular Farms
with interest on said sum, plus P125.00 as attorney's fees and P84.00 as costs. A writ of
execution, issued after the judgment had become final, was, on August 14, 1959, returned
unsatisfied, stating that Insular Farms had no leviable property. Edward filed with said
court the present action against Pacific Farms, Inc. — hereinafter referred to as appellee
— for the collection of the judgment aforementioned, upon the theory that appellee is the
alter ego of Insular Farms, which appellee has denied. In due course, the municipal court
rendered judgment dismissing appellant's complaint.

The record shows that, on March 21, 1958, appellee purchased 1,000 shares of stock of
Insular Farms for P285,126.99; that, thereupon, appellee sold said shares of stock to
certain individuals, who forthwith reorganized said corporation; and that the board of
directors thereof, as reorganized, then caused its assets, including its leasehold rights
over a public land in Bolinao, Pangasinan, to be sold to herein appellee for P10,000.00.

ISSUE:

Whether or not that the appellee, Pacific Farms is an alter ego of Insular Farms?

HELD: NO.

GR: where one corporation sells or otherwise transfers all of its assets to another
corporation, the latter is not liable for the debts and liabilities of the transferor

Except:

• where the purchaser expressly or impliedly agrees to assume such debts - no

proof
• where the transaction amounts to a consolidation or merger of the corporations -
not claimed
• where the purchasing corporation is merely a continuation of the selling
corporation; - no proof
• where the transaction is entered into fraudulently in order to escape liability for
such debts - no proof
price paid was fair and reasonable
Neither is it claimed that these transactions have resulted in the consolidation or merger
of the Insular Farms and appellee herein. On the contrary, appellant's theory to the effect
that appellee is an alter ego of the Insular Farms negates such consolidation or merger,
for a corporation cannot be its own alter ego.

Ong Yong vs. Tiu, G.R. No. 144476, 08 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), owned by Tius, became heavily indebted to the Philippine National
Bank (PNB) for P190M

To stave off foreclosure of the mortgage on the two lots where the mall was being built,
the Tius invited 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 each in addition to their already
existing subscription of 450,200 shares. 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 Tius accused the Ongs of (1) refusing to credit to them
the FLADC shares covering their real property contributions; (2) preventing David S. Tiu
and Cely Y. Tiu from assuming the positions of and performing their duties as Vice-
President and Treasurer, respectively, and (3) refusing to give them the office spaces
agreed upon. The controversy finally came to a head when the case was commenced by
the Tius at the Securities and Exchange Commission (SEC), seeking confirmation of their
rescission of the Pre-Subscription Agreement.

After hearing issued a decision confirming the rescission sought by the Tius. The above
decision was partially reconsidered but only insofar as the Ongs’ P70 million was declared
not as a premium on capital stock but an advance (loan) by the Ongs to FLADC and that
the imposition of interest on it was correct. Both parties appealed to the SEC en banc.
The SEC en banc confirmed the rescission of the Pre-Subscription Agreement but
reverted to classifying the P70 million paid by the Ongs as premium on capital and not as
a loan or advance to FLADC, hence, not entitled to earn interest.

ISSUE:

Whether the rescission of Pre-Subscription Agreement would result in unauthorized

liquidation.

RULING:

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.

Agdao Landless Residents Association, Inc. vs. Maramion, G.R. No. 188642, 17
October 2016
FACTS:

Petitioners are Agdao Landless Residents Association, Inc. (ALRAI), a non-stock, non-
profit corporation duly organized and existing under and by virtue of the laws of the
Republic of the Philippines, and its board of directors.

Dakudao & Sons, Inc. (Dakudao) executed six Deeds of Donation in favor of ALRAI
covering 46 titled lots (donated lots). One Deed of Donation prohibits ALRAI, as donee,
from partitioning or distributing individual certificates of title of the donated lots to its
members, within a period of five years from execution, unless a written authority is
secured from Dakudao. A violation of the prohibition will render the donation void, and
title to and possession of the donated lot will revert to Dakudao. The other five Deeds of
Donation do not provide for the five-year restriction.

In the board of directors and stockholders meetings, members of ALRAI resolved to

directly transfer 10 of the donated lots to individual members and non-members of ALRAI.

Respondents filed a Complaint against petitioners alleging that petitioners expelled them
as members of ALRAI, and that petitioners are abusing their powers as officers.
Respondents further alleged that petitioners were engaged in anomalous and illegal acts.
In their Answer, petitioners alleged that ALRAI transferred lots to Alcantara as attorney’s
fees ALRAI owed to her late husband, who was the legal counsel of ALRAI. On the other
hand, Javonillo and Armentano, as president and secretary of ALRAI, respectively, made
a lot of sacrifices for ALRAI, while Dela Cruz provided financial assistance to ALRAI.
Petitioners also alleged that respondents who are non-members of ALRAI have no
personality to sue. They also claimed that the members who were removed were legally
ousted due to their absences in meetings.

The court a quo treated the case as an intra-corporate dispute. It found respondents to
be bona fide members of ALRAI to which the CA affirmed. Under Section 2, Article III of
ALRAI’s Amended Constitution and By-Laws (ALRAI Constitution), the corporate
secretary should give written notice of all meetings to all members at least three days
before the date of the meeting. The CA found that respondents were not given notices of
the meetings held for the purpose of their termination from ALRAI at least three days
before the date of the meeting.

Being existing members of ALRAI, respondents are entitled to inspect corporate books
and demand accounting of corporate funds in accordance with Section 1, Article VII and
Section 6, Article V of the ALRAI Constitution. The CA nullified the transfers made to
Javonillo and Armentano because these transfers violated Section 6 of Article IV of the
ALRAI Constitution. Section 6 prohibits directors from receiving any compensation,
except for per diems, for their services to ALRAI. The CA upheld the validity of the
transfers to Dela Cruz and Alcantara because the ALRAI Constitution does not prohibit
the same. The CA held that as a consequence, the subsequent transfer of the lot covered
by TCT No. T-41366 to Loy from Alcantara was also valid.

Both parties filed separate motions for reconsideration with the CA but these were denied
in a Resolution. Thus, the parties filed separate petitions for review on certiorari under
Rule 45 of the Rules of Court with this Court.

ISSUE:

Whether respondents were legally dismissed as members of ALRAI.

Ruling: Respondents were illegally dismissed from ALRAI.

Section 91 of the Corporation Code of the Philippines (Corporation Code) provides that
membership in a non-stock, non-profit corporation (as in petitioner ALRAI in this case)
shall be terminated in the manner and for the cases provided in its articles of incorporation
or the by-laws. Agdao’s constitution provides that I the removal of the members “The
secretary shall give or cause to be given written notice of all meetings, regular or special
to all members ot the association of at least three days before the date of each meetings
either by mail or personally.” For failing to meet said notice requirements the removal of
the respondents as members is invalid.
Lydia Lao vs. Yao Bio Lim, G.R. No. 201306, 09 August 2017
Fact: An annual stockholders meeting was held by the stockholders of PSI on March 15,
2002. The stockholder list used in determining the stockholders who are entitled to be
present during the meeting was different from the list of stockholders as stated in its
general information sheet. Previously, they had already been ordered by the SEC to use
the GIS as basis for determining the corporate stockholders, but despite this, the
same was not used during the meeting. During the said meeting a new set of directors
were elected, and the authorized capital was increased by 300%.

Issue: Was the meeting valid, and can the stockholders who were not notified of the
meeting hold the new set of directors, who also organized the meeting, liable for
damages?

Ruling: The meeting was not valid and any act done during the same, including election
of new directors, is likewise invalid. The meeting should not have been carried out
in defiance of the SEC order to use the GIS as basis for determining the stockholders
entitled to attend the meeting. As to the award of damages, since the persons who
organized the meeting unjustifiably and obstinately refused to recognize the eliminated
stockholders’ shareholdings in PSI and to allow them to participate in the 2002
stockholders' meeting and elections of the corporation's directors. They did this despite
the previous Orders of the SEC; thus, depriving the stockholders of their property rights.
Such acts may be said to cause mental anguish, serious anxiety and social humiliation to
the stockholders who were not notified of the meeting.