TASK 1- Revised Corporation Code (RCC)

1. Matt lent P1, 000,000.00 to his brother, Federick. The agreement was secured by a
real estate mortgage over a parcel of residential land. Federick mortgaged the same
property in favor of M Corporation, but the mortgage agreement was made after the
latter’s dissolution. When Federick failed to pay, Matt foreclosed on the subject
property. Matt was declared the highest bidder. The president of M Corporation
exercised equitable redemption. The sheriff of the RTC, issued a Deed of Redemption
in favor of M Corporation. A complaint for Annulment of Deed of Redemption was
filed by Matt against the president of M Corporation.
a. Will the complaint for Annulment of Deed of Redemption prosper?
b. Will your answer be the same if M Corporation entered into a real estate mortgage
agreement prior to its dissolution?
Suggested answer:
a. Yes. The complaint for Annulment of Deed of Redemption will prosper. From the
foregoing, it is clear that, by the time M Corporation executed the real estate
mortgage agreement, its juridical personality has already ceased to exist. The
agreement is void as M Corporation could not have been a corporate party to the
same. To be sure, a real estate mortgage is not part of the liquidation powers that
could have been extended to Corporation. It could not have been for the purposes
of "prosecuting and defending suits by or against it and enabling it to settle and
close its affairs, to dispose of and convey its property and to distribute its assets." It
is, in fact, a new business in which M Corporation no longer has any business
pursuing. Consequently, any redemption pursuant to this void real estate mortgage
is likewise void, and could not be given any effect.
b. No. This time, M Corporation’s redemption of the subject property, even if already
after its dissolution (as long as it would not exceed three years thereafter), would
still be valid because of the liquidation/winding up powers accorded by Section 139
of the Revised Corporation Code, which empowers every corporation whose
corporate existence has been legally terminated to continue as a body corporate for
three (3) years after the time when it would have been dissolved. This continued
existence would only be for the purposes of "prosecuting and defending suits by or
against it and enabling it to settle and close its affairs, to dispose of and convey its
property and to distribute its assets" (Rich V. Paloma III, G.R. No: 210538).

2. Carcar, a foreign corporation organized under Delaware laws, executed a contract

with New Mina Corporation (NMC) wherein the NMC agreed to sell molasses to
Carcar. As required by amendments to the contract, Intra Star issued a performance to
guarantee delivery of the molasses. When NMC failed to deliver the agreed 10,500
metric tons of molasses, Carcar filed a complaint for sum of money against NMC and
 Intra Star. While RTC held Intra Star solidarily liable, CA ruled that Cargill had no legal
capacity to sue because it was doing business in the Philippines without a license.
a. May Carcar sue in the Philippines?
b. Assuming Carcar was doing business without a license, how does it affect its
suability?
Suggested answer:

a. Yes. Carcar had legal capacity to sue in the Philippines even without a license
because it is not doing business in the Philippines. The contract between petitioner
and NMC involved the purchase of molasses by petitioner from NMC. It was NMC,
the domestic corporation, which derived income from the transaction and not
petitioner. To constitute "doing business," the activity undertaken in the Philippines
should involve profit-making. Petitioner is a foreign company merely importing
molasses from a Philippine 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. Hence, Carcar can maintain
action for isolated transaction in the Philippines even without a license.
b. Where a foreign corporation does business in the Philippines without the proper
license, it cannot maintain any action or proceeding before Philippine courts; 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, a party is estopped from challenging the personality of a corporation
after having acknowledged the same by entering into a contract with it (Cargill, Inc.
vs. Intra Strata Assurance Corporation, G.R. No: 168266).

3. Starcase, a foreign corporation, and respondent BISI, domestic, both engaged in the
business of manufacturing office furniture, entered into an agreement whereby
Starcase granted BISI the right to market and distribute its products within the
Philippines for the account of the latter. BISI profited from dealership agreement for
12 years from 1987 until 1999. Starcase filed a complaint for sum of money against
BISI alleging, among others, that BISI had an unpaid account. BISI alleged that the
complaint failed to contain the required allegations on Starcase’s capacity to sue in
the Philippines despite the fact that Starcase was doing business in the Philippines
without the required license to do so. Consequently, it posited that the complaint
should be dismissed because of Starcase’s lack of legal capacity to sue in Philippine
courts.
a. May BISI challenge the capacity of Starcase to sue?
b. Does Starcase have legal capacity to sue?

Suggested answer:

a. No. Even assuming Starcase had been doing business in the Philippines without a
license, BISI would nonetheless be estopped from challenging the former’s legal
 capacity to sue. It cannot be denied that DISI entered into a dealership agreement
with Starcase and profited from it for 12 years from 1987 until 1999. By
acknowledging the corporate entity of Starcase and entering into a dealership
agreement with it and even benefiting from it, DISI is estopped from questioning
Starcase’s existence and capacity to sue. The rule is deeply rooted in the time-
honored axiom of Commodum ex injuria sua non habere debet — no person ought
to derive any advantage of his own wrong

b. Yes. Starcase can sue because it is not doing business. Only if the distributor acts for
the account of the principal that the appointment of distributor is considered as
doing business in the Philippines. The appointment of a distributor in the Philippines
is insufficient to constitute "doing business" unless it is under the full control of the
foreign corporation (Steelcase, Inc. v. Design International Selections, Inc., G.R. No.
171995).

4. Thalia Grace, treasurer of Jacinto Realty Corporation, filed a complaint-affidavit

charging Percy Chua and his wife of four counts of falsification of public documents.
Allegedly, the said accused falsified the Minutes of the Annual Stockholders meeting
of the Board of Directors. The accused caused it to appear in said Minutes that Thalia
Grace participated, when in truth and in fact, she was never present during the Annual
Stockholders. Percy argued that Thalia had no authority whatsoever to bring a suit in
behalf of the Corporation since there was no Board Resolution authorizing her to file
the suit. Thalia claimed that the suit was brought under the concept of a derivative
suit.

a. Who has a cause of action to file the complaint in the instant case?
b. Is the complaint filed by Thalia in the nature of a derivative suit?

Suggested answer:
a. The case involves falsification of corporate documents whose subject concerns
corporate projects of Jacinto Realty Corporation. Clearly, Jacinto Realty Corporation
is an offended party. Hence, Jacinto Corporation has a cause of action.
b. No. Not every suit filed in behalf of the corporation is a derivative suit. For a
derivative suit to prosper, it is required that the minority stockholder suing for and
on behalf of the corporation must allege in his complaint that he is suing on a
derivative cause of action on behalf of the corporation and all other stockholders
similarly situated who may wish to join him in the suit. It is a condition sine qua non
that the corporation be impleaded as a party because not only is the corporation an
indispensable party, but it is also the present rule that it must be served with
process. The judgment must be made binding upon the corporation in order that the
corporation may get the benefit of the suit and may not bring subsequent suit
against the same defendants for the same cause of action. In other words, the
corporation must be joined as party because it is its cause of action that is being
litigated and because judgment must be a res adjudicata against it. In the criminal
 complaint, nowhere is it stated that Thalia is filing the same in behalf and for the
benefit of the corporation. Thus, the criminal complaint including the civil aspect
thereof could not be deemed in the nature of a derivative suit (Chua v CA and Hao,
G.R. No. 150793).

5. Ting purchased 1400 TCL shares from his brother who was also president and
operations manager of TCL. When his brother died, Ting requested TCL Corporate
Secretary Teng to enter in the Stock and Transfer Book of TCL for the proper recording
of his acquisition. He also demanded the issuance of new certificates of stock in his
favor. TCL and Teng refused. Hence, he filed a petition for mandamus with SEC. The
secretary contends that prior to registration of stocks in the corporate books, it is
mandatory that the stock certificates are first surrendered because a corporation will
be liable to a bona fide holder of the old certificate if, without demanding the said
certificate, it issues a new one.

a. Is the surrender of the certificates of stock a requisite before registration of the

transfer may be made in the corporate books?
b. Is the surrender of certificates of stock a requisite for the issuance of new
certificates?

Suggested answer:
a. No. A certificate of stock is a written instrument signed by the proper officer of a
corporation stating or acknowledging that the person named in the document is the
owner of a designated number of shares of its stock. It is prima facie evidence that
the holder is a shareholder of a corporation. A certificate, however, is merely a
tangible evidence of ownership of shares of stock. It is not a stock in the corporation
and merely expresses the contract between the corporation and the stockholder.
The shares of stock evidenced by said certificates, meanwhile, are regarded as
property and 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.

Certain minimum requisites must be complied with for there to be a valid transfer of
stocks, to wit: (a) there must be delivery of the stock certificate; (b) the certificate
must be endorsed by the owner or his attorney-in-fact or other persons legally
authorized to make the transfer; and (c) to be valid against third parties, the transfer
must be recorded in the books of the corporation.

It is the delivery of the certificate, coupled with the endorsement by the owner or
his duly authorized representative that is the operative act of transfer of shares from
the original owner to the transferee. The Court even emphatically declared in Fil-
Estate Golf and Development, Inc., et al. v. Vertex Sales and Trading, Inc. that in "a
sale of shares of stock, physical delivery of a stock certificate is one of the essential
 requisites for the transfer of ownership of the stocks purchased." The delivery
contemplated in Section 63, however, pertains to the delivery of the certificate of
shares by the transferor to the transferee, that is, from the original stockholder
named in the certificate to the person or entity the stockholder was transferring the
shares to, whether by sale or some other valid form of absolute conveyance of
ownership.

b. Yes. In Bitong v. CA, the Court outlined the procedure for the issuance of new
certificates of stock in the name of a transferee:
First, the certificates must be signed by the president or vice-president,
countersigned by the secretary or assistant secretary, and sealed with the seal of the
corporation. Second, delivery of the certificate is an essential element of its
issuance. Third, the par value, as to par value shares, or the full subscription as to no
par value shares, must first be fully paid. Fourth, the original certificate must be
surrendered where the person requesting the issuance of a certificate is a transferee
from a stockholder.

The surrender of the original certificate of stock is necessary before the issuance of a
new one so that the old certificate may be cancelled. A corporation is not bound and
cannot be required to issue a new certificate unless the original certificate is
produced and surrendered. Surrender and cancellation of the old certificates serve
to protect not only the corporation but the legitimate shareholder and the public as
well, as it ensures that there is only one document covering a particular share of
stock (Teng v. Securities and Exchange Commission, G.R. No. 184332).

6. Evangelica Church was established in 1909 as a corporation sole with all corporate
powers lodged in a General Superintendent. Thirty-nine years later, Evangelica Church
enacted and registered a by-laws that established a Consistory. For all intents and
purposes, the Consistory served as the Evangelica Church’s board of directors.
Although the Evangelica Church remained a corporation sole on paper, it has always
acted as a corporation aggregate. In 2001, the Consistory resolved to convert the
Evangelica Church to a corporation aggregate. Those who belonged to a faction that
did not support the conversion argued that the conversion can take place only by first
dissolving the corporation sole and afterwards by creating a new corporation in its
place.
a. How may Evangelica Church amend its Articles of Incorporation?
b. May Evangelica Church change its character into a corporation aggregate by mere
amendment of its AOI without a need for dissolution?

Suggested answer:
a. While there is no specific mechanism provided under the Revised Corporation Code
for amending its AOI, Section 107 thereof allows the application to religious
corporations of the general provisions governing non-stock corporations.
 For non-stock corporations, the power to amend its articles of incorporation lies in
its members. The code requires two-thirds of their votes for the approval of such an
amendment. 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, for the one member
is but a trustee, according to Section 108 of the Revised Corporation Code, of its
membership.

b. Yes. 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 responsibility to third parties. The
one member, with the concurrence of two-thirds of the membership of the
organization for whom he acts as trustee, can self-will the amendment. He can, with
membership concurrence, increase the technical number of the members of the
corporation from "sole" or one to the greater number authorized by its amended
articles.

7. X is a stockholder of Z Corporation. Z Corporation is the leading manufacturer of shoes

and wearing apparel in the Philippines. X is also a minority stockholder of another
corporation whose lines of business were in direct competition with some of the
business activities of Z Corporation. X intends to examine the financial statements of Z
Corporation.
a. May X be allowed to inspect the documents of Z Corporation to determine its
financial condition?
b. Assuming X is entitled to inspect the documents, what is his remedy in case of the
denial of his demand to inspect?

Suggested answer:
a. Yes. X may be allowed to inspect the documents of Z Corporation to determine its
financial condition. Stockholders are entitled to inspect the books and records of a
corporation in order to investigate the conduct of the management, determine the
financial condition of the corporation, and generally take an account of the
stewardship of the officers and directors. A requesting party who is not a
stockholder or member of record, or is a competitor, director, officer, controlling
stockholder or otherwise represents the interests of a competitor shall have no right
to inspect or demand reproduction of corporate records. Here, X is not a controlling
stockholder of the competitor. Therefore, he is not prohibited from inspecting the
documents.
b. If the corporation denies or does not act on a demand for inspection and/or
reproduction, the aggrieved party may report such to the Commission. Within five
(5) days from receipt of such report, the Commission shall conduct a summary
 investigation and issue an order directing the inspection or reproduction of the
requested records.

8. S, a stockholder of Corporation X, was in urgent need of money. To alleviate his

financial difficulties, he executed a Deed of Assignment, wherein he assigned all of his
shares in Corporation X in favour of Z, a stockholder of the same corporation. A
stockholders’ meeting of Corporation X was held for the approval of the proposed
merger of Corporation X with Corporation A. S, however, was not notified of the
meeting. He argued that he remains to be a stockholder of Corporation X.
a. Did the assignment of the shares deprive S of his right to be notified as a
stockholder?
b. What is the status of the transfer of shares by S to Z?
Suggested answer:
a. No. Shares of stock so issued are personal property and may be transferred by
delivery of the certificate or certificates indorsed by the owner, his attorney-in-fact,
or any other person legally authorized to make the transfer. Thus, the assignment of
shares made by S was not sufficient to effect the transfer of shares since there was
no endorsement of the certificates of stocks as required by the RCC. The delivery to
the transferee is the operative act of transfer of shares from the lawful owner to the
transferee. Hence, the assignment of the shares did not deprive S of his right to be
notified as a stockholder.
b. Under the RCC, no transfer shall be valid, except as between the parties, until the
transfer is recorded in the books of the corporation showing the names of the
parties to the transaction, the date of the transfer, the number of the certificate or
certificates, and the number of shares transferred. Thus, the transfer shall be valid
between S and Z even if the same has not been recorded in the books of the
corporation. An unregistered transfer shall also be binding against all persons
standing in the shoes of the transferor such as, his executor or administrator, or his
heirs.

9. JM Corporation, a stock corporation, was incorporated to engage in a restaurant

business. Under its Articles of Incorporation, it has a corporate term of 50 years or
until March 31, 2019 (after the effectivity of the RCC). The corporation failed to apply
for the extension of its term before the arrival of March 31, 2019. JM Corporation
sought the advice of Atty. Lo Yer, because it wanted to continue its business
operations, considering that the business found to be profitable. Atty. Lo Yer said that
JM Corporation’s failure to extend its corporate term is fatal to its corporate
existence; hence, JM Corporation was already dissolved by expiration of its term.
a. Is JM Corporation’s failure to extend its corporate term fatal to its corporate
 existence?
b. Assuming that on March 1, 2019, JM Corporation changes its corporate term, what is
the remedy of the dissenting stockholders?
Suggested answer:
a. No. Corporations with certificates of incorporation issued prior to the effectivity of
the Revised Corporation Code (February 23, 2019), and which continue to exist, shall
have perpetual existence. Thus, JM Corporation’s failure to extend its corporate
term is not fatal to its corporate existence.
b. In case of change in the corporate term, the dissenting stockholders have appraisal
right in accordance with the provisions of the Revised Corporation Code (Sec. 11,
RCC).

10. JM Corporation was incorporated for the purpose of providing transportation services.
It has a specific corporate term of 10 years as provided by its Articles of Incorporation.
JM Corporation failed to apply for the extension of its corporate term. Thus, its
corporate term expires. JM Corporation sought your advice as to the remedies
provided under the RCC in order for it to continue its business.
a. What is the remedy of JM Corporation for it to continue its business?
b. Will your answer be the same if Jam Corporation is engaged in money service
business?
Suggested answer:
a. The remedy is revival. A corporation whose term has expired may apply for a revival
of its corporate existence, together with all the rights and privileges under its
certificate of incorporation and subject to all of its duties, debts and liabilities
existing prior to its revival. Upon approval by the Commission, the corporation shall
be deemed revived and a certificate of revival of corporate existence shall be issued,
giving it perpetual existence, unless its application for revival provides otherwise.
b. No, this time, there is a need for favourable recommendation of the government
agency. Under the RCC, no application for revival of certificate of incorporation of
banks, banking and quasi-banking institutions, preneed, insurance and trust
companies, non-stock savings and loan associations (NSSLAs), pawnshops,
corporations engaged in money service business, and other financial intermediaries
shall be approved by the Commission unless accompanied by a favorable
recommendation of the appropriate government agency (Sec. 11, RCC).

11. Corporation X, a stock corporation, failed to elect its directors on January 1, 2020, the
scheduled date of the election. The secretary reported the non-holding of elections
and the reasons therefor to the Commission on January 26, 2020. The report failed to
specify the new date of the election.
a. What is the remedy of S, a stockholder, who wishes to have the election
conducted?
b. Assuming the Commission summarily ordered the conduct of election, how is the
quorum of the meeting determined?
 Suggested answer:
a. S may apply with the SEC for the conduct of election. Under the RCC, if no new
date has been designated in the report, the Commission may, upon the
application of a stockholder, member, director or trustee, and after verification
of the unjustified non-holding of the election, summarily order that an election
be held.
b. Notwithstanding any provision of the articles of incorporation or bylaws to the
contrary, the shares of stock or membership represented at such meeting and
entitled to vote shall constitute a quorum for purposes of conducting an election
under this section.

12. Corporation X is a stock corporation engaged in the manufacturing of wearing apparel.

It issued no-par value shares for a consideration of P10 per share.
a. Is the issuance of no-par value share valid with respect to the consideration?
b. Assuming Corporation X is an insurance company, will your answer be the same?
c. May the consideration received by Corporation X be available for distribution as
dividends?
Suggested answer:
a. Yes, the issuance of no-par value shares is valid. Under the RCC, no-par value shares
must be issued for a consideration of at least Five pesos (P5.00) per share. The RCC
provides the minimum and not the maximum consideration.
b. No, banks, trust, insurance, and preneed companies, public utilities, building and
loan associations, and other corporations authorized to obtain or access funds from
the public, whether publicly listed or not, shall not be permitted to issue no-par
value shares of stock.
c. No, the entire consideration received by the corporation for its no-par value shares
shall be treated as capital and shall not be available for distribution as dividends.

13. Corporation X is a stock corporation engaged in the production of alcohol. It was

incorporated for a specific term of 10 years. After 5 years of operation, the business
proved to be profitable. Consequently, Corporation X intends to change its specific
corporate term by amending its articles of incorporation. A majority vote of the board
of directors was already obtained.
a. How may Corporation X obtain the consent of the stockholders representing 2/3 of
the outstanding capital stock as required by the RCC?
b. What is the remedy of the dissenting stockholders?
c. Assuming Corporation X is a non-stock corporation, how is the articles of
incorporation amended?
Suggested answer:
 a. Any provision or matter stated in the articles of incorporation may be amended by a
majority vote of the board of directors or trustees and the vote or written assent of
the stockholders representing at least two-thirds (2/3) of the outstanding capital
stock. Thus, vote (in a meeting) or mere written assent (no meeting) of 2/3 of the
outstanding capital stock is necessary.
b. Once the amendment is approved, dissenting stockholders may exercise their rights
of appraisal.
c. The articles of incorporation of a nonstock corporation may be amended by the vote
or written assent of majority of the trustees and at least two-thirds (2/3) of the
members.

14. Corporation X was issued by the Commission a Certificate of Incorporation on January

1, 2013. It was incorporated for the purpose of producing and selling shoes. Due to
disagreement with the supplier of the raw materials, Corporation X failed to
immediately commence its business operations. Come 2020, the election of the first
set of board directors and corporate officers was conducted. In the same year,
Corporation X commenced its business and entered into a contract with Y for the
latter’s security services.
a. When is the commencement of Corporation X’s juridical personality?
b. Does Corporation X have the capacity to enter into contract with Y?
c. Assuming Corporation X commenced its business in 2013 but becomes inoperative
for five years, what happens to Corporation X?
Suggested answer:
a. Juridical personality commences on January 1, 2013. Under the RCC, a private
corporation organized under this Code commences its corporate existence and
juridical personality from the date the Commission issues the certificate of
incorporation under its official seal.
b. No. If a corporation does not formally organize and commence its business within
five (5) years from the date of its incorporation, its certificate of incorporation shall
be deemed revoked as of the day following the end of the five (5)-year period.
Formal organization may consist in the election of new board directors or trustees
and corporate officers. Here, it was only in 2020 or after the lapse of the 5-year
period that Corporation X formally organized. Thus, Corporation X’s corporate
powers cease and it shall be deemed dissolved (automatic) as of the day after the
end of the five-year period.
c. If Corporation X has commenced its business but subsequently becomes inoperative
for a period of at least five (5) consecutive years, the Commission may, after due
notice and hearing, place the corporation under delinquent status.
A delinquent corporation shall have a period of two (2) years to resume operations
and comply with all requirements that the Commission shall prescribe. Upon
 compliance by the corporation, the Commission shall issue an order lifting the
delinquent status. Failure to comply with the requirements and resume operations
within the period given by the Commission shall cause the revocation of the
corporation’s certificate of incorporation.
The Commission shall give reasonable notice to, and coordinate with the
appropriate regulatory agency prior to the suspension or revocation of the
certificate of incorporation of companies under their special regulatory jurisdiction.

15. Corporation X is a non-stock corporation. The articles of incorporation of Corporation

X provides that it shall have 20 trustees who shall be elected for a term of one year. T,
one of the trustees, claimed that under the Revised Corporation Code, he shall hold
office for three years.
a. Does Corporation X violate the rule on the number of trustees a corporation may
have?
b. May the trustees of Corporation X be elected for a term of one year only?
Suggested answer:
a. No. Under the RCC, the Articles of Incorporation must provide the number of
trustees which may be more than fifteen (15).
b. Yes. Trustees shall be elected for a term not exceeding three (3) years from among
the members of the corporation. The RCC provides for the maximum but not the
minimum term.

16. The bylaws of Corporation X provides that the board may create an executive
committee composed of 5 directors. Thereafter, an Executive Committee was
constituted. The powers delegated to the executive committee include the authority
to sell all or substantially all of the corporation’s properties and assets.
a. Was there a valid constitution of executive committee as regards the number of
directors?
b. May the executive committee sell substantially all of the Corporation X’s properties?
Suggested answers:
a. Yes. If the bylaws so provide, the board may create an executive committee
composed of at least three (3) directors. The RCC only provides for the minimum
number of directors who shall constitute an executive committee. It does not
prohibit the composition of more than three directors.
b. No. Said committee may act, by majority vote of all its members, on such specific
matters within the competence of the board, as may be delegated to it in the bylaws
or by majority vote of the board, except with respect to the: (a) approval of any
action for which shareholders’ approval is also required. A sale of all or substantially
all of the corporation’s properties and assets, including its goodwill, must be
 authorized by the vote of the stockholders representing at least two-thirds (2/3) of
the outstanding capital stock. Considering that the approval of the stockholders is
likewise required, the executive committee may not sell substantially all of the
Corporation X’s properties

17. Corporation X and Corporation Y entered into an agreement whereby Corporation X

will absorb Corporation Y. Thus, corporation X will be the surviving corporation. Z was
the creditor of Corporation Y for the amount of P500 000. This loan was secured by a
mortgage on the equipment and machinery owned by Corporation Y.
a. Was there consolidation?
b. May Z sue Corporation X, the surviving corporation, for the amount owed by
Corporation Y?
c. Was the mortgage extinguished?
Suggested answer:
a. No. There was merger and not consolidation. There is merger when the constituent
corporations shall become a single corporation where one shall be the surviving
corporation designated in the plan of merger.
b. Yes. Corporation X may be sued for the liabilities of Corporation Y. Under the RCC,
the surviving corporation shall be responsible for all the liabilities and obligations of
each constituent corporation as though such surviving corporation had itself
incurred such liabilities or obligations.
c. No. The rights of creditors or liens upon the property of such constituent
corporations shall not be impaired by the merger or consolidation.

18. Corporation X decided to change its corporate name into Corporation Y by amending
its articles of incorporation. A meeting was held on January 1, 2020 where S, a
minority stockholder, cast his vote against the change of name. Nevertheless, the
change of name was effected. On January 26, 2020, S made a written demand for the
payment of the fair value of his shares, invoking his appraisal right.
a. Is S entitled to appraisal right?
b. Will your answer be the same if the appraisal right of S be premised on merger?
Suggested answer:
a. No. There are cases when articles of incorporation can be amended, but the
dissenting stockholders have no right of appraisal (change of name, increase in
the number of directors or trustees) because such amendments do not affect
their substantial rights.
b. No. Under the RCC, any stockholder of a corporation shall have the right to
dissent and demand payment of the fair value of the shares in case of merger or
consolidation.
19. Corporation Y decided to mortgage substantially all of its corporate property to secure
the payment of its debt. On February 1, 2020 a meeting was held for the proposed
action. S cast his vote against the mortgage of the corporate properties. On April 1,
2020, S made a written demand on the corporation for the payment of the fair value
of his shares invoking his appraisal right.
a. May S exercise his appraisal right?
b. Assuming that the appraisal right is validly exercised, may S be entitled to
dividend rights accruing after the demand?
Suggested answer:
a. No. While the stockholder of a corporation shall have the right to dissent and
demand payment of the fair value of the shares in case of mortgage of all or
substantially all of the corporate property and assets, the right of appraisal shall
be exercised within thirty (30) days from the date on which the vote was taken.
The failure to make the demand within such period shall be deemed a waiver of
the appraisal right. Here, the demand was made after the lapse of the 30-day
period.
b. No. From the time of demand for payment of the fair value of a stockholder’s
shares until either the abandonment of the corporate action involved or the
purchase of the said shares by the corporation, all rights accruing to such shares,
including voting and dividend rights, shall be suspended, except the right of such
stockholder to receive payment of the fair value thereof: Provided, That if the
dissenting stockholder is not paid the value of the said shares within thirty (30)
days after the award, the voting and dividend rights shall immediately be
restored.

20. Corporation X is organized for the purpose of establishing a bar exam review center
named JM Review Center. No part of the income of which is distributed as dividends.
From its rental of parking spaces, Corporation X obtains income which are exclusively
used for the improvement of its educational system. Y, a member of Corporation X,
died. H, an heir of Y claimed
a. May Corporation X be validly considered as a nonstock corporation despite the
receipt of income?
b. Is the membership of Y transferred to his heirs?
Suggested answer:
a. Yes, Corporation X is a nonstock corporation. A nonstock corporation is one
where no part of its income is distributable as dividends to its members,
trustees, or officers: Provided, That any profit which a nonstock corporation may
obtain incidental to its operations shall, whenever necessary or proper, be used
 for the furtherance of the purpose or purposes for which the corporation was
organized. Thus, the receipt of income does not preclude the existence of a
nonstock corporation as long as they are not distributed as dividends to the
members.
b. No. Membership in a nonstock corporation and all rights arising therefrom are
personal and non-transferable, unless the articles of incorporation or the bylaws
otherwise provide.