Professional Documents
Culture Documents
151969
September 4, 2009
Lessons Applicable: Election of Directors; Vacancy in the Board
(Corporate Law)
FACTS:
ISSUES:
1. W/N there is an unexpired term - NO
2. W/N the remaining directors of a corporations Board, still constituting a
quorum, can elect another director to fill in a vacancy caused by the
resignation of a hold-over director. - NO
term time during which the officer may claim to hold the office as
of right
not affected by the holdover
fixed by statute and it does not change simply because the office may
have become vacant, nor because the incumbent holds over in office beyond the end
of the term due to the fact that a successor has not been elected and has failed to
qualify.
tenure
term during which the incumbent actually holds office.
Section 23 of the Corporation Code: term of BOD only 1 year - fixed
and has expired (1 yr after 1996)
2. NO
reduction of the capital stock can take place only in the manner
an under the conditions prescribed by the statute or the charter
or the articles of incorporation. Moreover, strict compliance with
the statutory regulations is necessary
HELD: The par value of the certificates of stock should be the basis for
determining the amount to be paid as documentary stamp tax. First, the
NIRC Sec. 224 provides that On every original issue, whether on
organization, reorganization or for any lawful purpose, of certificates of
stock by any association, company or corporation, there shall be collected
a documentary stamp tax of one peso and ten centavos on each two
hundred pesos, or fractional part thereof, of the par value of such
certificates
There is no basis for considering stock dividends as a distinct class
from ordinary shares of stock since under this provision only certificates of
stock are required to be distinguished (into either one with par value or
one without) rather than the classes of shares themselves.
A stock certificate is merely evidence of a share of stock and not the
share itself. (Sec. 63, Corporation Code). Stock dividends are in the nature
of shares of stock, the consideration for which is the amount of
unrestricted retained earnings converted into equity in the corporations
books. There is, therefore, no reason for determining the actual value of
such dividends for purposes of the documentary stamp tax if the
certificates representing them indicate a par value.
Second. The documentary stamp tax here is not levied upon the specific
transaction which gives rise to such original issuance but on the privilege
of issuing certificates of stock. A documentary stamp tax is in the nature
of an excise tax. It is not imposed upon the business transacted but is an
excise upon the privilege, opportunity or facility offered at exchanges for
Held: No. The term capital and other terms used to describe
the capital structure of a corporation are of universal acceptance
and their usages have long been established in jurisprudence.
The capital subscribed is the total amount of the capital that
subscribers or shareholders have agreed to take and pay for,
which need not necessarily by, and can be more than, the par
value of the shares. In fine, it is the amount that the corporation
receives, inclusive of the premiums if any, in consideration of the
original issuance of the shares. In the case of stock dividends, it
is the amount that the corporation transfers from its surplus
profit account to its capital account. It is the same amount that
can be loosely termed as the trust fund of the corporation. The
Trust Fund doctrine considers this subscribed capital as a trust
fund for the payment of the debts of the corporation, to which
the creditors may look for satisfaction. Until the liquidation of the
corporation, no part of the subscribed capital may be returned or
released to the stockholder without violating this principle. Thus,
dividends must never impair the subscribed capital; subscription
commitments cannot be condoned or remitted; nor can the
corporation buy its own shares using the subscribed capital as
the considerations therefore.
generating sets, 3 reinforced concrete foundation for the 5,000 KW and 1,250 KW turbo
generator sets, among others. Aside from the work contract, PASUMIL required AEEC to
perform extra work, and provide electrical equipment and spare parts. Out of the total
obligation of P777,263.80, PASUMIL had paid only P250,000.00, leaving an unpaid balance,
as of 27 June 1973, amounting to P527,263.80. Out of said unpaid balance of P527,263.80,
PASUMIL made a partial payment to AEEC of P14,000.00, in broken amounts, covering the
period from 5 January 1974 up to 23 May 1974, leaving an unpaid balance of P513,263.80.
PASUMIL and PNB, and now NASUDECO, allegedly failed and refused to pay AEEC their
just, valid and demandable obligation (The President of the NASUDECO is also the VicePresident of the PNB. AEEC besought said official to pay the outstanding obligation of
PASUMIL, inasmuch as PNB and NASUDECO now owned and possessed the assets of
PASUMIL, and these defendants all benefited from the works, and the electrical, as well as the
engineering and repairs, performed by AEEC). Because of the failure and refusal of PNB,
PASUMIL and/or NASUDECO to pay their obligations, AEEC allegedly suffered actual
damages in the total amount of P513,263.80; and that in order to recover these sums, AEEC
was compelled to engage the professional services of counsel, to whom AEEC agreed to pay a
sum equivalent to 25% of the amount of the obligation due by way of attorney's fees. PNB and
NASUDECO filed a joint motion to dismiss on the ground that the complaint failed to state
sufficient allegations to establish a cause of action against PNB and NASUDECO, inasmuch
as there is lack or want of privity of contract between the them and AEEC. Said motion was
denied by the trial court in its 27 November order, and ordered PNB nad NASUDECO to file
their answers within 15 days. After due proceedings, the Trial Court rendered judgment in
favor of AEEC and against PNB, NASUDECO and PASUMIL; the latter being ordered to pay
jointly and severally the former (1) the sum of P513,623.80 plus interest thereon at the rate of
14% per annum as claimed from 25 September 1980 until fully paid; (2) the sum of
P102,724.76 as attorney's fees; and, (3) Costs. PNB and NASUDECO appealed. The Court of
Appeals affirmed the decision of the trial court in its decision of 17 April 2000 (CA-GR CV
57610. PNB and NASUDECO filed the petition for review.
Issue: Whether PNB and NASUDECO may be held liable for PASUMILs liability to
AEEC.
Held: Basic is the rule that a corporation has a legal personality distinct and separate from
the persons and entities owning it. The corporate veil may be lifted only if it has been used to
shield fraud, defend crime, justify a wrong, defeat public convenience, insulate bad faith or
perpetuate injustice. Thus, the mere fact that the Philippine National Bank (PNB) acquired
ownership or management of some assets of the Pampanga Sugar Mill (PASUMIL), which
had earlier been foreclosed and purchased at the resulting public auction by the Development
Bank of the Philippines (DBP), will not make PNB liable for the PASUMIL's contractual debts
to Andrada Electric & Engineering Company (AEEC). Piercing the veil of corporate fiction
may be allowed only if the following elements concur: (1) control not mere stock control,
but complete domination not only of finances, but of policy and business practice in respect
to the transaction attacked, must have been such that the corporate entity as to this transaction
had at the time no separate mind, will or existence of its own; (2) such control must have been
used by the defendant to commit a fraud or a wrong to perpetuate the violation of a statutory
or other positive legal duty, or a dishonest and an unjust act in contravention of plaintiff's legal
right; and (3) the said control and breach of duty must have proximately caused the injury or
unjust loss complained of. The absence of the foregoing elements in the present case precludes
the piercing of the corporate veil. First, other than the fact that PNB and NASUDECO
acquired the assets of PASUMIL, there is no showing that their control over it warrants the
disregard of corporate personalities. Second, there is no evidence that their juridical
personality was used to commit a fraud or to do a wrong; or that the separate corporate entity
was farcically used as a mere alter ego, business conduit or instrumentality of another entity or
person. Third, AEEC was not defrauded or injured when PNB and
NASUDECO acquired the assets of PASUMIL. Hence, although the assets of NASUDECO
can be easily traced to PASUMIL, the transfer of the latter's assets to PNB and NASUDECO
was not fraudulently entered into in order to escape liability for its debt to AEEC. Neither was
there any merger or consolidation with respect to PASUMIL and PNB. The procedure
prescribed under Title IX of the Corporation Code 59 was not followed. In fact, PASUMIL's
corporate existence had not been legally extinguished or terminated. Further, prior to PNB's
acquisition of the foreclosed assets, PASUMIL had previously made partial payments to AEEC
for the former's obligation in the amount of P777,263.80. As of 27 June 1973, PASUMIL had
paid P250,000 to AEEC and, from 5 January 1974 to 23 May 1974, another P14,000. Neither
did PNB expressly or impliedly agree to assume the debt of PASUMIL to AEEC. LOI 11
explicitly provides that PNB shall study and submit recommendations on the claims of
PASUMIL's creditors. Clearly, the corporate separateness between
PASUMIL and PNB remains, despite AEEC's insistence to the contrary.
Creditors of a corporation have the right to assume that so long as there are outstanding debts and
liabilities, the BOD will not use the assets of the corporation to buy its own stock, and will not declare dividends to
stockholders when the corporation is insolvent.
In this case, it was found that the corporation did not have an actual bona fide surplus from which
dividends could be paid. Moreover, the Court noted that the Board of Directors purchased the stock from the
corporation and declared the dividends on the stock at the same Board meeting, and that the directors were permitted
to resign so that they could sell their stock to the corporation. Given all of this, it was apparent that the directors did
not act in good faith or were grossly ignorant of their duties. Either way, they are liable for their actions which affected
the financial condition of the corporation and prejudiced creditors.
ISSUE:
Duty to creditors.
HELD:
FACTS:
On January 11, 1990, Asturias Sugar Central, Inc.
(ASCI), executed a Memorandum of Agreement with Monomer
Trading Industries, Inc. (MTII), whereby MTII shall acquire the
ISSUE:
YES.
It is P5 million. The Supreme Court held that in the case
under consideration, there is no dispute, and the Board even
mentioned in its August 17, 1993 Decision, that MSCI was
organized and incorporated on February 15, 1990 with an
vs.
REPUBLIC OF THE PHILIPPINES
G.R. Nos. 177857-58
February 11, 2010
FACTS:
The Court, in its earlier resolution adverted to,
approved, upon motion of petitioner Philippine Coconut
Producers Federation, Inc. (COCOFED), the conversion of the
sequestered 753,848,312 Class "A" and "B" common shares of
San Miguel Corporation (SMC), registered in the name of
Coconut Industry Investment Fund (CIIF) Holding Companies
(hereunder referred to as SMC Common Shares), into
753,848,312 SMC Series 1 Preferred Shares. The oppositors
herein made the following arguments: (1) economic
disadvantage and harm that government might suffer by such
proposed conversion; (2) they question the wisdom of PCGG in
converting those sequestered shares; (3) that the conversion is
invalid in view of the Commission on Audit Circular No. 89296 which provides that disposal of government property must
be undertaken via public Auction; (4) that the conversion
thereof needs the acquiescence of the 14 CIIF companies; (5)
As to the Motion to Intervene by UCPB, that it should be the
sole depositary of the proceeds of the dividends.
ISSUE:
Whether or not the arguments of the Oppositors herein
have merits.
RULING:
NO.
However, the appellee Bacolod-Murcia Milling Co., inc., resisted the claim,
and defended by urging that the stipulations contained in the resolution were
made without consideration; that the resolution in question was, therefore,
null and void ab initio, being in effect a donation that was ultra vires and
Montelibano, et.al. vs. Bacolod Murcia Milling Co. Inc. [G.R. No. L-15092
May 18, 1962]
After trial, the court below rendered judgment upholding the stand of the
defendant Milling company, and dismissed the complaint. Thereupon,
plaintiffs duly appealed to this Court.
Issue: Whether or not the resolution is valid and binding between the
corporation and planters.
Held: The Supreme Court held in the affirmative. There can be no doubt that
the directors of the appellee company had authority to modify the proposed
terms of the Amended Milling Contract for the purpose of making its terms
more acceptable to the other contracting parties. The rule is that
It is a question, therefore, in each case of the logical relation of the act to the
corporate purpose expressed in the charter. If that act is one which is lawful
in itself, and not otherwise prohibited, is done for the purpose of serving
corporate ends, and is reasonably tributary to the promotion of those ends, in
a substantial, and not in a remote and fanciful sense, it may fairly be
considered within charter powers. The test to be applied is whether the act in
question is in direct and immediate furtherance of the corporation's business,
fairly incident to the express powers and reasonably necessary to their
exercise. If so, the corporation has the power to do it; otherwise, not.
and the court is without authority to substitute its judgment of the board of
directors, it is valid and binding, and whether or not it will cause losses or
directors; the board is the business manager of the corporation, and so long
decrease the profits of the central, the court has no authority to review them.
as it acts in good faith its orders are not reviewable by the courts. Hence, the
appellee Bacolod-Murcia Milling Company is, under the terms of its
herein.