Non-Stock Corporations

Sections 87-95
Lions Club International vs Amores
Corporations; Jurisdiction; Courts; On matters
involving the internal affairs of an
unincorporated association, such as election
contest for officers of the Lions Club, the courts
will generally not interfere in the ruling of its
policy making body. Only when the acts
complained of are arbitrary, oppressive,
fraudulent, violative of civil rights, and the like,
is judicial interference to be made.We find for
the petitioners and in finding so, We adopt the
general rule that x x x the courts will not
interfere with the internal affairs of an
unincorporated association so as to settle
disputes between the members, or questions of
policy, discipline, or internal government, so
long as the government of the society is fairly
and honestly administered in conformity with its
laws and the law of the land, and no property or
civil rights are invaded. Under such
circumstances, the decision of the governing
body or established private tribunal of the
association is binding and conclusive and not
subject to review or collateral attack in the
courts. (7 C.J.S. pp. 38-39).
Same; Same; Same; Same.The general rule of
non-interference in the internal affairs of
associations is, however, subject to exceptions,
but the power of review is extremely limited.
Accordingly, the courts have and will exercise
power to interfere in the internal affairs of an
association where law and justice so require, and
the proceedings of the association are subject to
judicial review where there is fraud, oppression,
or bad faith, or where the action complained of is
capricious, arbitrary, or unjustly discriminatory.
Also, the courts will usually entertain jurisdiction
to grant relief in case property or civil rights are
invaded, although it has also been held that the
involvement of property rights does not
necessarily authorize judicial intervention, in the
absence of arbitrariness, fraud or collusion.
Moreover, the courts will intervene where the
proceedings in question are violative of the laws
of the society, or the law of the land, as by
depriving a person of due process of law.
Similarly, judicial intervention is warranted
where there is a lack of jurisdiction on the part of
the tribunal conducting the proceedings, where
the organization exceeds its powers, or where the
proceedings are otherwise illegal.

Compare Codal provisions

Stock
Non-Stock
Close Corporation

Close Corporations
Sections 96 to 105
Manuel Dulay Enterprises vs CA
Corporation Law; Petitioner corporation is
classified as a close corporation and
consequently a board resolution authorizing the
sale or mortgage of the subject property is not
necessary to bind the Corporation for the action
of its President.In the instant case, petitioner
corporation is classified as a close corporation
and consequently a board resolution authorizing
the sale or mortgage of the subject property is
not necessary to bind the corporation for the
action of its president. At any rate, a corporate
action taken at a board meeting without proper
call or notice in a close corporation is deemed
ratified by the absent director unless the latter
promptly files his written objection with the
secretary of the corporation after having
knowledge of the meeting which, in this case,
petitioner Virgilio Dulay failed to do.
Same; Piercing the veil of corporate fiction;
When the corporation is used merely as an alter
ego or business conduit of a person, the law will
regard the corporation as the act of that
person.It is relevant to note that although a
corporation is an entity which has a personality
distinct and separate from its individual
stockholders or members, the veil of corporate
fiction may be pierced when it is used to defeat
public convenience, justify wrong, protect fraud
or defend crime. The privilege of being treated as
an entity distinct and separate from its
stockholders or members is therefore confined to
its legitimate uses and is subject to certain
limitations to prevent the commission of fraud or
other illegal or unfair act. When the corporation
is used merely as an alter ego or business conduit
of a person, the law will regard the corporation
as the act of that person. The Supreme Court had
repeatedly disregarded the separate personality
of the corporation where the corporate entity was
used to annul a valid contract executed by one of
its members.

Sergio Naguiat vs NLRC

Same;
Same;
Same;
Close
Family
Corporations; Stockholders who are actively
engaged in the management or operation of the
business and affairs of a close corporation shall
be personally liable for corporate torts unless
the corporation has obtained reasonably
adequate
liability
insurance.Moreover,
petitioners also conceded that both CFTI and
Naguiat Enterprises were close family
corporations owned by the Naguiat family.
Section 100, paragraph 5, (under Title XII on
Close Corporations) of the Corporation Code,
states: (5) To the extent that the stockholders
are actively engage(d) in the management or
operation of the business and affairs of a close
corporation, the stockholders shall be held to
strict fiduciary duties to each other and among
themselves. Said stockholders shall be
personally liable for corporate torts unless the
corporation has obtained reasonably adequate
liability insurance. (italics supplied)

Foreign Corporations
Sections 123 to 136

license, it shall not be permitted to maintain or

intervene in any action, suit, or proceeding in any
court or administrative agency of the Philippines,
but it may be sued on any valid cause of action
recognized under Philippine laws.
Same; Same; Same; The purpose of the law in
requiring that foreign corporations doing
business in the Philippines be licensed to do so
and that they appoint an agent for service of
process is to subject the foreign corporation
doing business in the Philippines to the
jurisdiction of its courts.The purpose of the
law in requiring that foreign corporations doing
business in the Philippines be licensed to do so
and that they appoint an agent for service of
process is to subject the foreign corporation
doing business in the Philippines to the
jurisdiction of its courts. The object is not to
prevent the foreign corporation from performing
single acts, but to prevent it from acquiring a
domicile for the purpose of business without
taking steps necessary to render it amenable to
suit in the local courts. The implication of the
law is that it was never the purpose of the
legislature to exclude a foreign corporation
which happens to obtain an isolated order for
business from the Philippines, and thus, in effect,
to permit persons to avoid their contracts made
with such foreign corporations.

Communications Materials and Design vs CA

Corporations; Foreign Corporations; Actions;
Conflict of Laws; Generally, a foreign
corporation has no legal existence within the
state in which it is foreign, and this proceeds
from the principle that juridical existence of a
corporation is confined within the territory of the
state under whose laws it was incorporated and
organized, and it has no legal status beyond such
territory.Generally, a foreign corporation
has no legal existence within the state in which it
is foreign. This proceeds from the principle that
juridical existence of a corporation is confined
within the territory of the state under whose laws
it was incorporated and organized, and it has no
legal status beyond such territory. Such foreign
corporation may be excluded by any other state
from doing business within its limits, or
conditions may be imposed on the exercise of
such privileges. Before a foreign corporation can
transact business in this country, it must first
obtain a license to transact business in the
Philippines, and a certificate from the
appropriate government agency. If it transacts
business in the Philippines without such a

Same; Same; Same; Words and Phrases; The

true test as to what constitutes doing or
engaging or transacting business seems to
be whether the foreign corporation is continuing
the body or substance of the business or
enterprise for which it was organized. There is
no exact rule or governing principle as to what
constitutes
doing
or
engaging
or
transacting business. Indeed, such case must be
judged in the light of its peculiar circumstances,
upon its peculiar facts and upon the language of
the statute applicable. The true test, however,
seems to be whether the foreign corporation is
continuing the body or substance of the business
or enterprise for which it was organized.
Same; Same; Same; A foreign corporation is
deemed to have been engaged in or doing
business in the Philippines where its
arrangements with its Philippine business
contacts indicate convincingly its purpose to
bring about the situation among its customers
and the general public that they are dealing
directly with it and that it is actively engaging in
business in the country.With the above-stated

precedents in mind, we are persuaded to

conclude that private respondent had been
engaged in or doing business in the
Philippines for some time now. This is the
inevitable result after a scrutiny of the different
contracts and agreements entered into by ITEC
with its various business contacts in the country,
particularly ASPAC and Telephone Equipment
Sales and Services, Inc. (TESSI, for brevity).
The latter is a local electronics firm engaged by
ITEC to be its local technical representative, and
to create a service center for ITEC products sold
locally. Its arrangements, with these entities
indicate convincingly ITECs purpose to bring
about the situation among its customers and the
general public that they are dealing directly with
ITEC, and that ITEC is actively engaging in
business in the country.

Columbia Pictures Inv vs CA

Corporation Law; Actions; It is not the absence
of the prescribed license but doing business in
the Philippines without such license which
debars the foreign corporation from access to
our courts.The obtainment of a license
prescribed by Section 125 of the Corporation
Code is not a condition precedent to the
maintenance of any kind of action in Philippine
courts by a foreign corporation, However, under
the aforequoted provision, no foreign corporation
shall be permitted to transact business in the
Philippines, as this phrase is understood under
the Corporation Code, unless it shall have the
license required by law, and until it complies
with the law in transacting business here, it shall
not be permitted to maintain any suit in local
courts. As thus interpreted, any foreign
corporation not doing business in the Philippines
may maintain an action in our courts upon any
cause of action, provided that the subject matter
and the defendant are within the jurisdiction of
the court. It is not the absence of the prescribed
license but doing business in the Philippines
without such license which debars the foreign
corporation from access to our courts. In other
words, although a foreign corporation is without
license to transact business in the Philippines, it
does not follow that it has no capacity to bring an
action. Such license is not necessary if it is not
engaged in business in the Philippines.
Same; Same; No general rule or governing
principles can be laid down as to what
constitutes doing or engaging in or

transacting business.No general rule or

governing principles can be laid down as to what
constitutes doing or engaging in or
transacting business. Each case must be judged
in the light of its own peculiar environmental
circumstances. The true tests, however, seem to
be whether the foreign corporation is continuing
the body or substance of the business or
enterprise for which it was organized or whether
it has substantially retired from it and turned it
over to another.
Same; Same; There is no showing that, under
our statutory or case law, petitioners are doing,
transacting, engaging in or carrying on business
in the Philippines as would require obtention of
a license before they can seek redress from our
courts.Based on Article 133 of the
Corporation Code and gauged by such statutory
standards, petitioners are not barred from
maintaining the present action. There is no
showing that, under our statutory or case law,
petitioners are doing, transacting, engaging in or
carrying on business in the Philippines as would
require obtention of a license before they can
seek redress from our courts. No evidence has
been offered to show that petitioners have
performed any of the enumerated acts or any
other specific act indicative of an intention to
conduct or transact business in the Philippines.
Same; Same; A foreign corporation will not be
regarded as doing business in the State simply
because it enters into contracts with residents of
the State, where such contracts are consummated
outside the State.As a general rule, a foreign
corporation will not be regarded as doing
business in the State simply because it enters into
contracts with residents of the State, where such
contracts are consummated outside the State. In
fact, a view is taken that a foreign corporation is
not doing business in the State merely because
sales of its product are made there or other
business furthering its interests is transacted
there by an alleged agent, whether a corporation
or a natural person where such activities are not
under the direction and control of the foreign
corporation but are engaged in by the alleged
agent as an independent business.
Mergers and Consolidations
Sections 76 to 80

Dissolution
Sections 117 to 121, 22

Liquidation
Section 122
Gelano vs CA
Corporation Law; Attorneys; Trustee; A
corporation with a pending court action may still
continue prosecuting or defending the same for
three years after its dissolution. Its legal counsel
may be considered its trustee for that case
only.However, a corporation that has a
pending action and which cannot be terminated
within the three-year period after its dissolution
is authorized under Section 78 to convey all its
property to trustees to enable it to prosecute and
de fend suits by or against the corporation
beyond the three-year period. Although private
respondent did not appoint any trustee, yet the
counsel who prosecuted and defended the
interest of the corporation in the instant case and
who in fact in behalf of the corporation may be
considered a trustee of the corporation at least
with respect to the matter in litigation only. Said
counsel had been handling the case when the
same was pending before the trial court until it
was appealed before the Court of Appeals and
finally to this Court. We therefore hold that there
was a substantial compliance with Section 78 of
the Corporation Law and as such, private
respondent Insular Sawmill, Inc. could still
continue prosecuting the present case even
beyond the period of three (3) years from the
time of its dissolution.
Clemente vs CA
orporation Law; Corporation Code; Dissolution;
Sections 117 to 122 of the Corporation Code
provide the various modes for dissolving,
liquidating or winding up, and terminating the
life of the corporation.If, indeed, the sociedad
has long become defunct, it should behoove
petitioners, or anyone else who may have any
interest in the corporation, to take appropriate
measures before a proper forum for a peremptory
settlement of its affairs. We might invite
attention to the various modes provided by the
Corporation Code (see Secs. 117-122) for
dissolving, liquidating or winding up, and
terminating the life of the corporation. Among
the causes for such dissolution are when the
corporate term has expired or when, upon a
verified complaint and after notice and hearing,
the Securities and Exchange Commission orders
the dissolution of a corporation for its continuous
inactivity for at least five (5) years.

Same; Same; Same; Corporation continues to be

a body corporate for three (3) years after its
dissolution for purposes of prosecuting and
defending suits by and against it and for
enabling it to settle and close its affairs.The
corporation continues to be a body corporate for
three (3) years after its dissolution for purposes
of prosecuting and defending suits by and against
it and for enabling it to settle and close its affairs,
culminating in the disposition and distribution of
its remaining assets.
Same; Same; Same; The termination of the life of
a juridical entity does not by itself cause the
extinction or diminution of the rights and
liabilities of such entity nor those of its owners
and creditors.It may, during the three-year
term, appoint a trustee or a receiver who may act
beyond that period. The termination of the life of
a juridical entity does not by itself cause the
extinction or diminution of the rights and
liabilities of such entity (see Gonzales vs. Sugar
Regulatory Adminis tration, 174 SCRA 377) nor
those of its owners and creditors. If the threeyear extended life has expired without a trustee
or receiver having been expressly designated by
the corporation within that period, the board of
directors (or trustees) itself, following the
rationale of the Supreme Courts decision in
Gelano vs. Court of Appeals (103 SCRA 90)
may be permitted to so continue as trustees by
legal implication to complete the corporate
liquidation. Still in the absence of a board of
directors or trustees, those having any pecuniary
interest in the assets, including not only the
shareholders but likewise the creditors of the
corporation, acting for and in its behalf, might
make proper representations with the Securities
and Exchange Commission, which has primary
and sufficiently broad jurisdiction in matters of
this nature, for working out a final settlement of
the corporate concerns.