Professional Documents
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Yes. A holder or stockholder includes a person Yes. Section 62 of the Corporation Code
holding stocks in trust, and trustees holding expressly allows a previously incurred
corporate stock are regarded for all legal indebtedness to be used as consideration for
purposes as stockholders. However, the rights the issuance of stocks, provided that the
of a beneficial owner will, of course, be valuation of the indebtedness be determined by
recognized and protected in equity in proper the board of directors, subject to approval of
cases. In other words, even where legal title to the SEC, in order to prevent watering of stocks.
stock is vested in a certain person, equity will Watering of stocks is a situation wherein the
treat him as a trustee holding it for the real and consideration for subscription is not a fair
beneficial owners, in proper cases. Article 1455 valuation equal to the par or issue value of the
of the Civil Code provides that when any trustee stock. The amount of the indebtedness or
uses trust funds for the purchase of property liabilities to be settled should be at least equal
and causes the conveyance to be made to him to the par value of the shares of stock which the
or a third person, a trust is established by corporation intends to issue. However, there
operation of law in favor of the person to whom must first be an indebtedness incurred in order
the funds belong. Moreover, a trustee must not that a liability may be converted into
make investments of funds in their own names subscription payment.
but always indicate that they are made in trust
capacities. Thus, the trustee merely acts for the In this connection, the following requirements
stockholders whose stocks are held in trust, are to be submitted to the SEC:
with the latter being the owners thereof. thus, 1. Detailed schedule of liabilities being
they are individual subscribers of shares of offset, showing all debts and credit to
5. What shall be done when properties In the instant case, BPI appears to have a prior
requiring ownership registration, right to the name. Likewise, the second
such as land, are used as paid-up requisite in the Philips Export case is also
capital of a corporation? present because: the proposed name is (a)
identical or (b) deceptive or confusingly similar
No. A corporation is an artificial entity created Sarona v. National Labor Relations Commission
by operation of law. It possesses the right of has defined the scope of application of the
succession and such powers, attributes, and doctrine of piercing the corporate veil:
properties expressly authorized by law or
incident to its existence. It has a personality The doctrine of piercing the corporate veil
separate and distinct from that of its applies only in three (3) basic areas, namely: 1)
stockholders and from that of other defeat of public convenience as when the
corporations to which it may be connected. As a corporate fiction is used as a vehicle for the
consequence of its status as a distinct legal evasion of an existing obligation; 2) fraud cases
entity and as a result of a conscious policy or when the corporate entity is used to justify a
decision to promote capital formation, a wrong, protect fraud, or defend a crime; or 3)
corporation incurs its own liabilities and is alter ego cases, where a corporation is merely a
legally responsible for payment of its farce since it is a mere alter ego or business
obligations. In other words, by virtue of the conduit of a person, or where the corporation is
separate juridical personality of a corporation, so organized and controlled and its affairs are
the corporate debt or credit is not the debt or so conducted as to make it merely an
credit of the stockholder. This protection from instrumentality, agency, conduit or adjunct of
liability for shareholders is the principle of another corporation.
limited liability.
In this connection, case law lays down a three-
Equally well-settled is the principle that the pronged test to determine the application of the
corporate mask may be removed or the alter ego theory, which is also known as the
corporate veil pierced when the corporation is instrumentality theory, namely:
just an alter ego of a person or of another
corporation. For reasons of public policy and in (1) Control, not mere majority or
the interest of justice, the corporate veil will complete stock control, but complete
justifiably be impaled only when it becomes a domination, not only of finances but of
shield for fraud, illegality or inequity committed policy and business practice in respect
against third persons. to the transaction attacked so that the
corporate entity as to this transaction
However, the rule is that a court should be had at the time no separate mind, will or
careful in assessing the milieu where the existence of its own;
doctrine of the corporate veil may be applied.
Otherwise an injustice, although unintended, (2) Such control must have been used by
may result from its erroneous the defendant to commit fraud or wrong,
The Nell Doctrine states the general rule that 14. M filed a complaint against the
the transfer of all the assets of a corporation to Cuencas for collection of sum of
another shall not render the latter liable to the money, for which the court issued a
liabilities of the transferor. If any of the above- writ of preliminary attachment, with
cited exceptions are present, then the M posting a bond issued by S
transferee corporation shall assume the Insurance. The properties of A C Inc.
liabilities of the transferor. The exception of the were levied upon in the execution of
Nell doctrine, which finds its legal basis under the writ. The Cuencas sought to quash
Section 40, provides that the transferee the writ alleging that (1) the action
18. FEGDI is a stock corporation involved Yes. The acts of T and U clearly bound the
in developing golf courses, while FELI corporation, and thus, it could be made liable
is engaged in real estate therefor under the doctrine of apparent
development. FEGDI obtained shares authority. The doctrine of apparent authority
of stock in one of FELI’s projects as a provides that a corporation will be estopped
result of its financing support and from denying the agent’s authority if it
construction efforts. It sold some of knowingly permits one of its officers or any
its shares to RSACC, which the latter other agent to act within the scope of an
later sold to VST. However, the shares apparent authority, and it holds him out to the
remained under the name of FEGDI. public as possessing the power to do those acts.
Can VST be considered as owner of The doctrine of apparent authority does not
the shares of stock? apply if the principal did not commit any acts
or conduct which a third party knew and relied
No. In a sale of shares of stock, physical delivery upon in good faith as a result of the exercise of
of a stock certificate is one of the essential reasonable prudence. Moreover, the agent’s
requisites for the transfer of ownership of the
38. M Corp employed B, who was later on No. No such agreement was reached. Section 23
dismissed from employment after of the Corporation Code expressly provides that
having tested positive during a the corporate powers of all corporations shall
random drug test conducted in the be exercised by the board of directors. Just as a
office. B thus filed an action for illegal natural person may authorize another to do
dismissal against M Corp and E, its certain acts in his behalf, so may the board of
president. Should the case prosper directors of a corporation validly delegate some
against E? of its functions to individual officers or agents
appointed by it. Thus, contracts or acts of a
No. A corporation has a personality separate corporation must be made either by the board
and distinct from its officers and board of of directors or by a corporate agent duly
directors who may only be held personally authorized by the board. Absent such valid
liable for damages if it is proven that they acted delegation/authorization, the rule is that the
with malice or bad faith in the dismissal of an declarations of an individual director relating to
employee. Absent any evidence on record that the affairs of the corporation, but not in the
petitioner E acted maliciously or in bad faith in course of, or connected with, the performance
Upon the enactment of Republic Act No. 8799 Section 2. Definition. – An election
(The Securities Regulation Code), effective on contest refers to any controversy or dispute
August 8, 2000, the jurisdiction of the SEC over involving title or claim to any elective office in a
intra-corporate controversies and the other stock or non-stock corporation, the validation
cases enumerated in Section 5 of P.D. No. 902-A of proxies, the manner and validity of elections,
was transferred to the Regional Trial Court and the qualifications of candidates, including
52. What happens when an intra- 53. A complaint for injunction and
corporate dispute has been properly damages was filed by ADC Corp
filed in the official station of the against AHV Association and its
designated Special Commercial Court president. This arose as ADC alleged
but is, however, later wrongly that AHV Association constructed a
assigned by raffle to a regular branch multi-purpose hall and swimming
of that station? pool on one of the parcels of land
owned by ADC which were to be sold
The erroneous raffling to a regular branch without its consent and approval.
instead of to a Special Commercial Court is only However, its SEC registration had
a matter of procedure – that is, an incident been revoked more than three years
related to the exercise of jurisdiction – and, prior to the institution of the action.
thus, should not negate the jurisdiction which Can it still file the instant case?
the RTC had already acquired. In such a
It is true that under Section 175 of the . . . [A]s used in the present-day context[,] the
Intellectual Property Code, "news of the day dichotomy has little or no relationship to the
and other miscellaneous facts having the policy which it should effectuate. Indeed, all too
character of mere items of press information" often the sweeping language of the courts
are considered unprotected subject matter. regarding the nonprotectibility of ideas gives
However, the Code does not state the impression that this is of itself a policy of
that expression of the news of the day, the law, instead of merely a clumsy and
particularly when it underwent a creative outdated tool to achieve a much more basic
process, is not entitled to protection. end.