Manuel's defense of the doctrine of de facto corporation cannot be validly raised because the doctrine

of de facto corporation requires that there must be colorable compliance with the legal requirement.
That is, to comply with the requirement of the Securities and Exchange Commission that such
corporation is registered or in other words, there must be a Certificate of Incorporation. Here, there is
no Certificate of Registration issued yet by the SEC. Thus, the defense of doctrine of de facto corporation
cannot be validly raised by Manuel.

- No de facto corporation, at the very least, submitted AOI and there must be an issued certificate
of incorporation
- De facto corporation – existence could be questioned, through a direct attack through quo
warranto proceeding initiated by Solicitor General
o There is a flaw in the incorporation
o Naoverlook ng SEC na may kulang na reqt and still issued certificate
o Colorable compliance
- De jure corporation – substantial compliance with requirements
Reverse veil-piercing action means that the corporation is held liable for the debts or liabilities of its
shareholders. Reverse piercing of corporate veil may be applicable in our jurisdiction if it is proven that
the debtor deliberately used a corporation, taking advantage of its distinct and separate personality, to
transfer his assets there so that the creditor would not be able to collect from him.

- Opposite of corporate piercing

- Reverse veil-piercing, corporation is liable for debts or obligations of the officers
- Francisco case (statement there is merely obiter dictum)
- Applicable in the Philippines, main purpose is to transfer properties so di ka mahabol ng
creditors
A. Abby is entitled to be paid dividends because the Corporation Code provides that the holders of
subscribed shares that are not fully paid provided that they are not delinquent has all the rights of a
shareholder. Thus, since Abby subscribed to 100,000 shares of stock and such shares are not delinquent,
then she is entitled to be paid dividends.

- Entitled to paid dividends, no declaration of delinquency yet

- Delinquency still entitled to dividend but will be deducted to the balance of unpaid

B. Abby Cruz is entitled to be paid cash dividends for her 100,000 shares subscription. The basis is the
number of shares subscribed in the distribution of dividends and not the amount paid by the
shareholder.

- Subscription cannot be divided

- Entitled to paid dividend for 100,000 share
The sale of the printing machine can be considered as sale of substantially all of the assets of the
corporation. While the printing machine is composed only of 25% of the corporate assets, the printing
machine is mainly used in the operation of AA Corp as it is engaged in the business of printing
magazines. Without such printing machine, the corporation would be incapable of continuing its
business. Thus, the sale of the printing machine can be considered as a sale of substantially all of the
assets of the corporation.

- Sale of printing machine – substantially all

o But remember there is still 70% cash, you can rent/ money could still be used to
subcontract
A. The requirements to make the contract with a self-dealing director valid are: (1) that the presence of
such director in the board meeting where the contract was approved is not necessary so as to constitute
a quorum; (2) the vote of such director is not necessary for the approval of the contract; and (3) that
such contract is fair and reasonable.

- 5 requisites
- Self-dealing – entering into contract with own corporation

B. If only one of the requisites are present, such contract would be voidable. Such contract with a self-
dealing director may be ratified by a vote of stockholders holding 2/3 of the outstanding capital stocks.

- Depend on the kind of requisite that was lacking

- If contract is not fair and reasonable, you cannot ratify it

C. If all of the requisites are absent, then such contract would be considered as void.

- Voidable (sec 31)

As a rule, SEC has jurisdiction over intra-corporate disputes. Thus, to resolve the case at bar, it is
necessary to determine if the position of Mr. Golta as General Manager is considered as a corporate
officer or not. If Mr. Golta is considered as a corporate officer, then his case would fall under the
jurisdiction of the SEC as it is considered as an intra-corporate dispute.

To be considered as a corporate officer, the position must be stated in the corporation's by-laws. In this
case, the position of General Manager is not indicated in the corporation's by-laws. Thus, Mr. Golta is
not a corporate officer. Hence, the Complaint for Reinstatement and Money Claim should have been
filed with the RTC since the case will be considered as a labor case and not an intra-corporate dispute.
The corporation is correct in its contention that the SEC has no jurisdiction over the case and that the
complaint should have been filed with the RTC.

- Intra-corporate dispute – special commercial court of RTC (RA8799)

- Mark II marketing
- Depends on whether general manager is on by-laws
o Relationship test
o
The Grandfather Rule is a principle wherein we check or look into the citizenship of the individuals that
directly or indirectly own a corporation to determine whether such corporation complies with the
constitutional requirement of Filipino ownership. If there are corporate shareholders, we look into the
citizenship also of the shareholders of such corporate shareholders to determine if they comply with the
required Filipino ownership. Thus to attain the requirement of the Constitution to reserve to Filipinos
the utilization of natural resources, we should check the individual stockholders and such individual
stockholders should be composed of 60% Filipinos. We apply the grandfather rule when there is doubt
as to the citizenship of the individuals owning the corporation. The grandfather rule is applied to
determine the actual participation of foreigners in a corporation that is engaged in business that is
reserved for Filipinos.

- Method of determining the nationality of the corporation that owns shares of another
corporation (corporate layering)
- Supplement to control test
The doctrine of corporation by estoppel may be validly raised against the fraternity brothers of Mr. Bean
because the Code provides that all person who assumes to acts as a corporation would be liable as
general partners. In this case, Mr. Bean's fraternity brothers knew that there was no such corporation
and so they would be liable under the doctrine of corporation by estoppel.

However as for Mr. Bean, as he was sued in his personal capacity, his defense of good faith and the
doctrine of corporation by estoppel and that he is a mere investor is tenable because Mr. Bean did not
knew that there was a defect in the incorporation of the corporation.

- Discuss 3 defenses
- Corporation by estoppel
o Cannot interpose as defense because concept is to protect 3 rd person, defense available
only to those corporation deals
- Good faith
o Can interpose good faith as defense, unaware that corporation was not fully organized
- Mere investor
o Cannot interpose because he is the president of the corporation
a. The authorized capital stock is PHP 100,000 as it is the initial capital converted into 10,000 shares at a
par value of PHP 10.00 per share.

- authorized capital stock – fixed

- P100,000

b. The subscribed capital is the subscribed shares of 4,000 of Juan and the subscribed shares of 4,000 of
Maria. Thus, the total subscribed shares is 8,000, totalling to PHP 80,000 subscribed capital computed at
par value of PHP 10.00

- covered by subscription agreement regardless of whether paid

- 8,000 shares

c. Paid-up capital is PHP 50,000, computed by adding Juan and Maria's paid shares which is 5,000 shares
multiplied by the par value of PHP 10.00 per share.

- 5,000 shares

d. Outstanding capital is 10,000 shares minus the subscribed shares of 8,000. Thus, outstanding shares is
2,000 multiplied by par value of PHP 10 per share, totalling as PHP 20,000 outstanding capital stock.

- stocks held by the

- 8,000
An ostensible partner is someone who holds himself out as having authority to represent the
partnership when the other partners did not consent to such representation.

A stockholder is someone who owns a share of stock in a corporation.

- Identify joint account

- An ostensible partner is a partner in a joint account/business, in the eyes of public ostensible
partner is the owner of the business
o Individually liable, does not have separate juridical personality
o As to management, manager of joint account
- Stockholder – owner of share of stock
o Not personally liable
o As to management, does not handle management unless corporate officer
The functions of the Board of Directors which include but not limited to amending the Articles of
Incorporation as assented by the stockholders holding 2/3 of outstanding capital stock, organizing and
electing the corporate officers, increase or decrease capital stock with the assent of the stockholders
holding 2/3 outstanding capital stock, amending the corporate by-laws, power to declare dividends with
assent of the stockholders, power to sell and dispose of assets with the assent of the stockholders,
power to enter into management contracts, ordering the merger or consolidation of corporation, and
dissolving the corporation.

- Nectarine vs. Juico

- Exercise all powers, conduct business, control and hold properties of corporation,
appoint/discharge officer/agent
According to the Revised Corporation Code, if I were to put up or organize a corporation, the
corporators needed can be as low as 1 person in case of a one-person corporation but not exceeding 15
in number.

- Corporator – running corporation – you need at least two although single stockholder there
because president cannot be corporate secretary at the same time although he can be treasurer
at the same time
o One person corporation (OPC) – organized by natural person, estate, trust (NET)
 Limited liability rule
 Subject to 2 level of taxes: corporate income tax and dividend tax (sa single
stockholder)
 Designation of nominee – will take the place as director/president in case of
incapacity of single stockholder (consent of nominee)
 Alternate nominee
 Liability of single stockholder – should be qualified, limited liability rule will apply only if
can prove that OPC is adequately financed (properties of OPC is independent of single
stockholder’s properties and there is no commingling of funds)
 Jointly and severally liable for liabilities if he cannot prove that opc is
adequately financed.
o Sole prop – natural person
 Proprietor liable for all debts of sole prop up to personal prop
 Only one personal income tax to the proprietor
According to the Revised Corporation Code, the officer positions needed are (a) the president who
should be a director, (b) the vice-president who should be a resident, (c) the secretary who should be a
citizen and a resident and (d) other officers as may be provided under the by-laws.

A derivative suit is a suit brought by a stockholder in the name and on behalf of the corporation to
redress the wrongs committed against it or to protect corporate rights whenever the officials of the
corporation refuse to sue or are the ones that are sued. A derivative suit also requires that the
corporation is impleaded as a plaintiff.

In this case, there is a wrong committed against the stockholders. This is because the directors cannot
elect the 2 new directors to fill in the vacancy caused by the resignation of Director A and B. The Revised
Corporation Code requires that such vacancy should be filled upon by election by the stockholders. Thus
there is a wrong committed against the stockholders because the directors violated a right of the
shareholders.

The derivative suit will not prosper. In this case, the derivative suit is filed against the corporation, not in
the name and on behalf of the corporation. Thus, the derivative suit will not prosper. A representative
action/suit or a suit brought by a stockholder in behalf of himself and the other stockholders when a
wrong is committed against a group of stockholders is the proper remedy in this case and not a
derivative suit.
A trustee by legal implication are the Board of Directors or Board of Trustees when there is no receiver
or trustee that is designated and the extended life of the corporation that is undergoing liquidation has
expired. The Board of Directors/Trustees may be permitted to continue as a trustee by legal implication
until the liquidation is terminated.
A. A stockholder's appraisal right is the right of the dissenting stockholder to withddraw from the
corporation and demand the payment of the fair value of his/her shares after dissenting against a
corporate acts involving changes in corporate structure.

B. Teresa cannot exercise the right of appraisal because to exercise the right of appraisal, the
stockholder must be the dissenting stockholder. In this case, Teresa was not the one who dissented the
corporate act of converting preferred voting shares to non-voting shares. It was Sophie who dissented.
Thus, Teresa cannot exercise the right of appraisal.

According to the Supreme Court, transacting business in the Philippines means the foreign corporation
must actually transact or perform specific business transactions in the Philippine territory on a
continuing basis in its own name and its own account. Such actual transaction is necessary so as to
acquire jurisdiction over the foreign corporation and thus require such corporation to get the necessary
Philippine business license. The absence of such actual transaction would mean that we cannot require
the foreign corporation to acquire such business license, meaning we have no jurisdiction to require
such foreign corporation to secure such business license.
A de facto partnership is a partnership which failed to comply with the legal requirements required for
the establishment of such partnership.

As a rule, a de facto partnership cannot exist because partnership is perfected by mere consent.
However, if such de facto partnership contracted obligations against another, the "partner" who
contracted such obligations should be liable for such.
The law provides that an industrial partner cannot engage in business for himself unless the partnership
allowed him to do so.

Joe is an industrial partner as he contributed his labor and industry to the partnership. Applying the law,
since Joe is an industrial partner, he cannot engage in any business for himself, that is to open and
operate a coffee shop, unless he is authorized by the partnership. Doing so, he may be excluded from
the partnership and may be required to pay damages.

Rudy, on the other hand, is a capitalist partner. A capitalist partner cannot engage in the same line of
business as that of the partnership unless such capitalist partner was expressly permitted by the
partnership. In this case, Rudy opened a car accessories store. While it may be related to the business of
the partnership which is car repairs, a car accessories store is not necessarily the same line of business
as to that of car repairs. Thus, Rudy may engage in such business of car accessories.
Angie should be hired by the partnership because both the managing partners Wang and Xhang agreed
to the hiring of Angie. The managing partners are in charge of the administration of partnership affairs.
Thus, since both managing partners agreed to the hiring of Angie, Angie should be hired.

As for Brenda, Brenda cannot be hired by the partnership because although one of the managing
partners Wang agreed to the hiring of Brenda, the other managing partner Xhang disagreed to it. Thus,
we should look into the partner who owns the controlling interest. In this case, Yang has the controlling
interest because he has contributed PHP 50,000 to the partnership (biggest contribution to the common
fund). Thus, since Yang, the partner owning the controlling interest, and Xhang, another managing
partner, opposed to the hiring of Brenda, Brenda cannot be hired by the partnership.
The Revised Corporation Code allows the Directors to attend and to vote at board meetings through
remote communications such as videoconferencing which allows them to participate at such meetings.
Since the Revised Corporation Code already allows such attendance and voting at board meetings
through remote communications, the meeting is valid and the contention of Mr. A should be struck
down.
A joint venture is an association of persons or corporations jointly undertaking a commercial enterprise
to which they contribute assets and share risks. A joint venture is governed by the laws of partnership.

In a partnership, the partners undertake it for the purpose of general business, which contemplates
continuity of business, until they decide to end the partnership affairs.

In a joint venture, the parties undertake a joint venture usually for a single transaction only, which
contemplates that a joint venture is temporary only.

Another distinction is that a corporation can enter into a joint venture but a corporation cannot enter
into a partnership.

The actions of the club concerning the share and membership of Mr. Pogi is warranted because the
Revised Corporation Code allows non-stock corporation to terminate the membership of a member in
accordance with the Articles of Incorporation or its By-Laws. Here, the club had already sent Mr. Pogi 5
letters concerning his delinquent account and requesting his attendance to scheduled conferences
regarding his failure to pay his dues in arrears. Since the termination of membership and sale was done
in accordance with the By-Laws of Village Sports Club, as provided by the Revised Corporation Code, the
actions of the club concerning the share and membership of Mr. Pogi is warranted.
a. The basis of the liability of the owner of the vessel with respect to the damage to the wharf is tort or
delict because the liability came from the negligence of the master of the vessel.
b. With respect to the damage to the merchandise, the basis of the liability of the owner of the vessel is
the contract of carriage. Under a contract of carriage, the owner of the vessel obliges himself to
undertake or observe the proper diligence (extraordinary diligence) required of him from the moment
the common carrier receives the merchandise from the shipper until the time the merchandise or cargo
arrives at its destination.

c. The defense of the exercise of the diligence of a good father of the family will not lie in the case of the
merchandise because the law requires that the common carrier exercise extraordinary diligence in the
carriage of goods from the moment the common carrier receives the merchandise from the shipper until
the time the merchandise or cargo arrives at its destination. As for the damages to the wharf, the
defense of the exercise of the diligence of a good father of the family will lie because the law requires
that the owner must exercise due diligence in the selection and supervision of his employees whom he
is responsible for. In such case, the law provides that the defense of the exercise of diligence of a good
father of a family will lie.

An arrastre operator is a person or entity who performs the handling of the cargos in portsides. They are
in charge of receiving, handling, securing, and delivering the cargo over piers, warehouses and storages.

As one who handles the cargos, an arrastre operator is bound to observe the same degree of
care/diligence as that required of a common carrier. This means that they should take good care of the
goods received from the vessel to the point of its turn over, delivering it in good condition to the
consignee.
Under the registered owner rule, the registered owner of the vehicle whose operation causes injury or
damage to another is legally liable for the injury caused. But this does not bar the registered owner to
claim reimbursement from the actual and present owner.

In this case, Ramon is the registered owner of the freight truck. Thus, he is the one who is primarily
liable for such damages. The lease contract for it to be binding to third persons must be registered. In
this case, even if there was a stipulation that Tomas will bear the losses and damages attending to
commodities hauled by him, it was not registered. Thus, such lease contract is not binding to third
persons. Ramon would still be liable for the loss of such commodities.

However, it would not bar Ramon to claim or recover from Jenny who is now the owner of the vehicle.
Paula cannot sue the MRT for contractual breach even if she was within the MRT premises because at
the time of the incident which caused damage to Paula, Paula has no intention yet to board the MRT.

The common carrier is bound to exercise utmost diligence with regards to its passengers from the time
the passenger buys the ticket and presents themself to board such carrier. There must be an intention to
use such common carrier. While Paula already purchased two tokens or tickets for her ride to work and
for her ride home, Paula has no intention yet to board the MRT. Thus, the carrier MRT cannot consider
Paula as a passenger and does not owe her extraordinary diligence.
The contract is governed by the Civil Code provision on common carriers because the Civil Code provides
that the law of the country governs such transport of cargo from foreign ports to the Philippines.

The stipulation is valid if such charter is a demise or bareboat charter. In a demise or bareboat charter,
the charterer mans the vessel, meaning that for that charter, the charterer effectively owns such vessel
for the duration of the charter, making the vessel a private carrier. Since for the charter, the vessel
becomes a private carrier, a stipulation for exemption from liability for loss due to negligence of its
agent is valid and not against public policy.

However if the charter is a contract of affreightment, the vessel continues to be a common carrier. Thus,
a stipulation exempting the vessel from liability for loss due to negligence of its agent is void because it
is contrary to public policy.
In this case, we must qualify if the charter is a bareboat or demise, or an affreighment.

If the charter is a bareboat or demise, then the stipulation is valid. In a bareboat or demise charter, the
charterer effectively owns the vessel for the duration of the charter, which makes the vessel a private
carrier and thus a stipulation exempting the company from liability for loss or damage arising from the
negligence of its agents is valid. Thus, the shipping company is not liable in this case.

If the charter is a contract of affreightment, the charter does not transform the vessel into a private
carrier, meaning a stipulation exempting the company from liability for loss or damage arising from its
agents is against public policy and thus void. Thus, the shipping company is liable in this case.
BLTB, the common carrier, is liable for the act of the passenger. In case of injury to its passengers, the
common carrier is presumed to be at fault or have acted negligently unless it is proven that the common
carrier exercised extraordinary diligence.

A common carrier is also responsible for injuries sustained by its passengers on acts committed by their
fellow passengers if the employee of the common carrier could have prevented or stopped such act
through the exercise of diligence of a good father of a family. In this case, the driver did not ensure that
no one can drive the bus while he went outside. There is the absence of the diligence required of him
and thus, the common carrier should be liable for the act of the passenger.
The suit will not prosper because the owner of the vehicle cannot be held liable for an accident involving
his vehicle if such vehicle was taken without his consent or knowledge. In this case, Heidi took the car
while his father was asleep, thus, Heidi took the car without the consent of his father.

However, if Heidi is a minor, the law provides that parents are responsible for the damages caused by
the minor children who live in their company. Thus, if Heidi is a minor, Heidi's father may be sued for
damages being liable for the acts of his minor child.
As a general rule, the obligation follows the vessel meaning that if there is no vessel, there is no liability.
Since nothing was recovered, the owner of the vessel should not have been liable. However, because
the vessel that sank was overloaded, there is negligence on the part of the owner of the vessel. Thus,
the owner of the vessel is liable for the damages since there is negligence on the part of the owner of
the vessel by overloading the vessel.
A kabit system is an agreement wherein a person who is granted a certificate of public convenience
allows another person owning a motor vehicle to use or operate under such certificate for a fee. Kabit
system is considered as contrary to public policy and thus, void and inexistent.

In this case, the actual owner of the jeepney may sue the erring vehicle. This is because kabit system is
considered as contrary to public policy and thus is void and inexistent. The registered owner or the
owner of certificate of public convenience operating in accordance with the kabit system thus cannot
sue such erring vehicle.