Constitutional Rights of Corporations having a lien on the crop-placed obstacles that
denied the consummation of a lease contract
over her excess sugar quota. PNB through its STONEHILL V. DIOKNO: 42 search warrants board of directors had wanted to raise the were issued against petitioners seeking to rental rate before granting its approval to the search the persons of the Stonehill et al. and the lease contract. This in turn, resulted in a loss of premises of various corporations of which the income for Tapnio as the potential lessee same were officers, in relation to alleged eventually refused to agree to the proposed violations of Central Bank Laws, as well as other terms. RD: CF. Article 21, CC- Having known tariff, customs and tax laws. RD: 1. No standing- that the agricultural year was about to expire even as officers, petitioners have no standing to and the quota would be wasted if unused, the assail the legality of the search warrants as they bank failed to observe the required diligence have a distinct personality from the corporation and prudence and subsequently caused injury they represent. It can only be invoked by the to Tapnio as the latter was unable to utilize the corporation itself. 2. Nevertheless, the warrants same. “A corporation is civilly liable in the same issued were in the nature of general warrants as manner as natural persons for torts, because it lacked the allegation of a specific offense. In "generally speaking, the rules governing the addition, the warrants issued were also in liability of a principal or master for a tort connection with more than one allegation, in committed by an agent or servant are the same contravention of the Rules of Court, as well as whether the principal or master be a natural lacking in particularity of things or papers to be person or a corporation, and whether the seized. (cf. Moncado-non-exclusionary rule servant or agent be a natural or artificial person. abandoned). All of the authorities agree that a principal or master is liable for every tort which he expressly directs or authorizes, and this is just as true of a corporation as of a natural person, A BASECO V. PCGG: The PCGG was tasked with corporation is liable, therefore, whenever a the sequestration of petitioner private tortious act is committed by an officer or agent corporation through Executive Orders. under express direction or authority from the Accordingly, the former sought to obtain stockholders or members acting as a body, or, various corporate books and documents to achieve its purpose of taking over the generally, from the directors as the governing corporation. BASECO invokes the right against body’”. self-incrimination. RD: 1. Juridical persons- being creatures of the State vested with certain privileges and franchises are subject to the laws Criminal Liability of a Corporation of the state and the limitations of its charter(Wilson v. US). In the exercise of its sovereignty, through a right reserved in the PEOPLE V. TAN BOON KING: Defendant was the legislature, it has the power to investigate manager of a corporation who had failed to pay whether such a franchise has been abused and the correct taxes. RD: A corporation can only accordingly, demand the production of its books, act through its agents and officers and when the documents and papers. same is liable for a felony, everyone involved in it may be punished.
Liability for Torts
Entitlement to Moral Damages
PNB V .CA: PHILAMGEN, as surety seeks to
recover an amount paid to PNB, from a bond MAMBULAO V. PNB: Plaintiff corporation executed in favor of Tapnio et al, the same applied for a loan with the defendant bank and being secured by the standing crops of the despite repeated demands, it failed to fulfill its latter. Tapnio avers however, that the bank- obligation to pay. Accordingly, PNB requested suffer anguish or wounded feeling. 2. Moreover, the co-defendant sheriffs herein to foreclose moral damages are only awarded on the the mortgaged property of the corporation. existence of malice or bad faith (cf. Human Mambulao Lumber seeks moral damages as the Relation Provisions)- it was deemed that sheriffs sold the properties in Camarines Norte ABS-CBN had acted properly and in seeking a as opposed to have the same conducted in relief for injunction, was truly convinced of the Manila, as provided for in the agreement. RD: merit of its case, absent malice. An artificial person such as a corporation may not suffer from anguish, wounded feelings, shock or humiliation which are the bases for JARDINE DAVIES V. CA: Purefoods, after due moral damages. Moreover, it had already bidding, granted a contract to FEMSCO for the ceased its operations by the time installation of generators. Subsequently, the defendant-sheriffs took possession of its former unilaterally rescinded the contract and properties and any damage to its reputation awarded the same to Jardine Davies, thereby would be irrelevant (NOTA BENE:Court granted injuring FEMSCO. The court a quo granted moral exemplary for the sheriffs’ acts). damages to FEMSCO on the premise that the latter’s reputation had been tarnished as it had abruptly canceled orders from its suppliers. RD: ASSET PRIVATIZATION TRUST V. CA: The huge Due to the rescission of the contract, FEMSCO loans obtained by MMIC eventually led to its suffered damage and correctly deserved the foreclosure. Cabarrus, a stockholder thereof, award. It had ordered supplies due to the initiated a derivative suit and along MMIC, was project’s urgency and had its corporate identity granted moral damages by the Arbitration besmirched when it duly canceled the same. Commission, premised upon the theory that the assets seized by the government in foreclosure proceedings belonged to another corporation MERALCO V. TEAM ELECTRONICS: Meralco that was predominantly owned by Cabarrus. RD: alleges that respondent had tampered with its Despite being a derivative suit, MMIC was never electrical meters, resulting in incorrect readings. impleaded and was a non-party; as such, it was Respondent corporation denied the allegations, improper for it to receive an award of moral and refused to pay the differential billings. As damages. More notably, due to its inability to such, petitioner disconnected the latter’s settle its obligations, it had no reputation to electricity. RD: While the Court for the most protect- its name would not be besmirched by part agreed with TEAM Electronics, it deleted the proceedings. Anent Cabarrus, the award the award of moral damages. As a general rule, was improper as well, the action involved being corporations may not be awarded the same as one in behalf of MMIC, an entity distinct from they are incapable of suffering wounded its shareholders. feelings. An exception however exists in instances where a corporation’s reputation is besmirched and such claims must be duly ABS-CBN V. CA: An injunction was filed by proven. In this instance, the deletion of the ABS-CBN to prevent RBS from exclusively airing award is proper as the respondent corporation Viva films, on account that there existed a never adduced evidence to support the grant of perfected contract between ABS-CBN and VIVA moral damages. when its representative Del Rosario had already agreed to the proposed terms. RBS filed for a suit for moral damages alleging that its Nationality of a Corporation reputation had been besmirched when it failed to air the movies it had promised its viewers. RD: 1. The Court had dismissed the pronouncement ROD RIZAL V. UNG SUI SI TEMPLE: Petitioner in Mambulao as mere obiter and upheld the Registrar refused the registration of a donation doctrine that corporations may not be the of land in favor of respondents, an unregistered subject of moral damages as it is unable to religious organization whose three trustees were Chinese. RD: The refusal was proper, impossible crime may also not be appreciated pursuant to the Constitutional prohibition as the alleged prohibition does not exist. limiting the alienation of lands to Filipino nationals or corporations at least sixty-percent owned by Filipinos. It is irrelevant that the respondent was a religious organization and had no capital stock as its controlling membership FILIPINAS COMPANIA V. CHRISTERN: were of foreign nationality. Respondent corporation sought the satisfaction of its claim against insurer-petitioner. Filipinas denied the same on the ground that the contested policy had ceased to be in effect RCA DAVAO V. ROD DAVAO: Rodis executed a upon the declaration of war against Germany deed of sale in favor of petitioner. The and pursuant thereto, as Christern was respondent Registrar had refused on account controlled by German citizens, was an enemy. that the corporation had failed to comply with The prevailing law at the time- the Philippine the Constitutional requirement of having Insurance Law- denied insurance coverage to sixty-percent of its stock being owned by those considered as public enemies. RD: 1. Filipinos. RD: 1. The RCA of Davao is a The Court applied the controlling test (Clark v. corporation sole, comprised of one person and Ubersee) and determined that as the majority his successors, who, for perpetuity, enjoy of shareholders who controlled Christern, et al. various capacities and advantages. 2. A Incorporated were Germans, the same should corporation sole has no citizenship and is the be treated as an enemy corporation. 2. As the administrator of various temporalities in behalf insured goods had perished after the of the faithful. 3. The Corporation Law expressly corporation had become an enemy, it cannot allows the registration of lands by a corporation avail of the indemnity provided by the insurance sole. contract. 3. In the interest of equity, premiums paid after the corporation had become an enemy should be returned. PEOPLE V. QUASHA: Defendant was a member of the Philippine Bar found guilty of falsification, having made it to appear that a certain Baylon PALTING V. SAN JOSE: Respondent San Jose owned sixty per centum of Pacific Airways. It is Petroleum, a Panamanian corporation, filed an alleged that Baylon’s share was paid for by an application to have its shares traded in the American and was a mere trustee of foreigners, Philippines, the proceeds therefrom to be resulting in a contravention of the applied to the operations of San Jose Oil, a Constitutional prohibition against foreign domestic entity. Palting et al. contest the ownership. As such, the defendant interposes subsequent authorization granted to the this appeal. RD: 1. For falsification to be respondent on the ground that the agreement appreciated, it must be shown that there between SJP and SJO would be in contravention existed a) an obligation to disclose the truth; of the Constitutional prohibitions on foreign and b) an intent to injure a third person. ownership and other laws, as SJP owns 90% of Quasha however, was under no obligation to SJO. In response, San Jose cites the reveal that Baylon was a mere trustee as the Laurel-Langley Agreement as basis for its parity Constitutional prohibition refers to existing agreement. RD: 1. The Constitution restricts the entities, and avoids the formation of public ownership of corporations engaged in the utilities with foreign capital. 2. In addition, a exploitation of natural resources to companies corporation entirely formed with foreign capital with sixty percent Filipino ownership, alongside may subsequently transfer the same to Filipinos, American citizens or corporations (by virtue of in compliance with the law. The important thing the parity amendment). As the respondent is that it complies with such nationality corporation herein is of Panamanian origin and requirements upon the application for its is even further owned by two Venezuelan franchise or any other authority. 3. An companies, they fall beyond the purview of what the law allows. 2. In addition, the Corporation Law also forbade another mining through various corporations and by means of company from acquiring another. structuring equity, had control of at least sixty percent of petitioner corporations. (2015): The motion for reconsideration is denied. The “Control Test” and the “Grandfather Rule” may be used side by side and should complement each other. NARRA NICKEL V. REDMONT: Respondent domestic corporation Redmont Mining sought to explore several mining areas in Palawan. It GAMBOA V. TEVES: The present petition was learned however that such areas were already commenced by PLDT stockholder Gamboa, covered by Mineral Production Sharing seeking to annul the sale of the Philippine Agreement (MPSA) applications from petitioner government of PTIC shares to corporations Narra, Tesoro, and McArthur. The Metro-Pacific, an affiliate of First Pacific, a Hong former then contested to have such Kong based holding company who is also a applications denied, on the ground that MBMI, shareholder of PLDT. It is alleged that the sale a wholly Canadian owned corporation, had involves a transfer of PLDT shares to First Pacific, ownership through various companies of at thereby increasing the latter’s holdings to a least forty percent, each, of threshold contravening the Constitutional petitioner-corporations. Petitioners assail the prohibition on foreign ownership. The main objection on the premise that (a) they have contention in this case whether the term complied with ownership requirements as they “capital” in such a prohibition merely involves are at least sixty percent owned by Filipinos; common shares alone or total outstanding and (b) the issue of nationality is immaterial as capital stock (including non-voting preferred they have converted their prior applications for shares). RD: (2011): 1. The term “capital” in the MPAAs to applications for Financial or Technical Constitution refers to those shares which have Assistance Agreements (FTAA) which are voting rights (including preferred shares) as it is granted to foreign owned corporations. RD: through voting by which control over a (2014): 1. The conversion of applications is an corporation is exercised. Clearly, PLDT’s articles admission of the petitioners’ want of provided that preferred shareholders would be qualifications to engage in mining activities. deprived of voting rights and should therefore Moreover, it was noted that the Office of the be excluded from the computation of Filipinos President had revoked such FTAAs upon the for the purposes of determining compliance. 2. discovery of misrepresentations and falsehoods Mere legal title to shares is insufficient; full in their applications. 2. Corporate layering is beneficial ownership must be considered in admittedly allowed by the Foreign Investments ascertaining compliance with the Constitutional Act but not when it used to contravene mandate. (2012): Motion for reconsideration Constitutional prohibitions. Accordingly, when denied. such a structure is present (or when the sixty-forty proportion is in doubt), the stricter “Grandfather Rule” - where ownership in an ROY III V. HERBOSA: Respondent Herbosa, as investing corporation is eventually traced Chairperson of the SEC, issued the disputed (grandfathered) to determine the total memo pursuant to the Gamboa decision, percentage of ownership- is used. In essence, mandating that corporations comply with BOTH only the actual percentage of Filipino owned Filipino ownership requirements on the (a) the shares in an investing corporation s counted 3 total number of outstanding shares of stock The liberal “Control Test”- where as long as it is entitled to vote in the election of directors shown that the investing corporation is at least (voting rights); AND (b) the total number of sixty percent owned by Filipinos- may be used outstanding shares of stock, whether or not side by side with the Grandfather Rule. 4. Joint entitled to vote in the election of directors ventures find no application in the instant case (beneficial ownership-either through voting at bar. On the contrary, it was clear that MBMI power, investment power, or both). Moreover, the SEC ruling that the PLDT is compliant with consular functions as well as overseeing the foreign ownership requirements is also assailed. welfare of OFW’s in Taiwan. Petitioner sought RD: 1. The assailed memorandum by the SEC records from the COA pertaining to MECO’s is fully compliant with the Gamboa decision. audits and in the absence thereof, wants the The latter contemplates of both the voting Court to compel the former to conduct one. rights requirements as well as the full beneficial RD:1. Pursuant to the Administrative Code, as ownership test in the determination of a well as the GOCC Governance Act, the law corporation’s nationality. 2. The assailed impresses three attributes for an entity to decision is non-existent as the SEC has not made become a GOCC, namely: (a) it must be a stock any determination anent PLDT’s compliance or or non-stock corporation; (b) it must perform want thereof. public functions; and (c) the government must have ownership thereof. While the MECO complies with the first two attributes, the Classification of a Corporation government lacks a controlling interest over the same- Presidential letters requesting the PSPCA V. COA: Petitioner was incorporated as appointment of persons to its board are mere juridical entity more than a hundred years ago recommendations . In addition, it was pursuant to Act 1285, antedating the incorporated under the Corporation Code. As Corporation Law as well as the SEC, for the such, given the peculiar circumstances purpose of promoting animal welfare and the regarding its creation and operation, it is a sui enforcement of animal protection laws. It was generis entity entrusted with the promotion of previously imbued with the powers to unofficial relations with Taiwan. 2. Nevertheless, apprehend violators of animal protection laws the verification and consular fees it collects as well collect fines in relation thereto, the makes it subject to COA audit pursuant to the same being subsequently transferred to local Administrative Code. police entities. Accordingly, it became the subject of the disputed COA audit, on the ground that it was a government agency subject CIR V. CLUB FILIPINO: Respondent corporation to its powers. RD: 1. The “charter test” as was assessed taxes and charged with penalties introduced by the 1935 Constitution finds no relating thereto. It is alleged that Club Filipino application to petitioner corporation as it was had not paid percentage taxes arising from the incorporated prior to the same. It cannot be operation of a bar and a restaurant on its given retroactive effect as the present situation premises. RD: For a stock corporation to exist, it does not fall within the allowed exceptions. 2. must have (1) a capital stock divided into shares PSPCA, despite a want of a general corporation and (2) an authority to distribute to the holders law, is a private entity with public functions in of such shares, dividends or allotments of the the form of a quasi-public corporation. This is surplus profits on the basis of the shares held shown by (a) the deprivation of its policing (sec. 3, Act No. 1459). Despite having its capital powers by virtue of Statute; (b) the lack of a stock divided into shares, nowhere in its articles government representative on its board or any nor in its by-laws does an authority to distribute form of control or supervision from any State dividends exist. Its operation of a bar and a agency, aside those which are general in nature, restaurant remains incidental to its status as a such as reportorial requirements to the Civil fraternal, civic, non-profit, and non-stock entity, Governor, now inherited by the President; (c) its and as such, may not be assessed taxes. enrolment with the SSS,
Paul Pierce Cases
FUNA V. MECO: Constrained by the lack of diplomatic relations between Taiwan and the CONCEPT V. NLRC: Private respondents were Philippines, the Manila Economic and Cultural terminated by petitioner corporation. They filed Office (MECO) was established for the purpose and eventually won an illegal dismissal suit. In of establishing friendly relations and unofficial the process of executing the judgment, one of ties with the Republic of China, including certain the properties involved was claimed to have been outside the purview of the same, as G.HOLDINGS V. NAMAWU: G Holdings Concept Builders had now ceased its business extended financial arrangements to benefit and the properties were now occupied by or Maricalum Mining, secured by the latter’s belonged to Hydro Philippines. RD: A properties. The former eventually foreclosed on perusal of both corporations show an identity in the same. Sometime later, a labor dispute arose shareholders and directors, and similarity in between Maricalum and its employees, with the books and records and business methods. later seeking to enforce the favorable judgment Clearly, Concept ceased its business operations against the properties that had been apparently to evade the award due the workers while sold to G. Holdings. RD: The mortgages were having Hydro continued its ventures. The not a sham- they involved the Philippine “alter-ego” therefore should be appreciated. government and were executed almost four (NOTA BENE: Requisites (a): Complete control years prior the dispute. The deed relied on by not merely through a majority but dominance of respondents was a mere offshoot of the notes finances and business practices; (b) The control agreed upon sometime earlier. is used to perpetuate a fraud or a wrong or do a violation of law or an unjust act; (c) The control and breach of duty is the proximate PEA-PGTWO V. NLRC: The Gonzales family cause of the injury.) owned two corporations Pantranco and Macris Realty. Both companies eventually became distressed and creditors eventually took over. KUKAN V. REYES: Private respondent Morales While the former eventually folded, the later won favorable judgment against Kukan for its became a subsidiary of PNB-PNB Madecor. The inability to pay amounts due him. In the pertinent question at bar involves the propriety execution of judgment, KIC opposed the levying of attaching the new entity’s assets to satisfy of properties it allegedly owned on the ground Pantranco’s obligation against its former that its right to due process was violated and employees. RD: The properties involved were that it was different entity from Kukan. not owned by the judgment debtor Pantranco International. RD: 1. The courts a quo erred in but rather, of Macris the predecessor of ruling against respondent as they both never Madecor. Accordingly, absent the showing that acquired jurisdiction over KIC as the same was both corporations were mere vehicles of never impleaded in the present issue. 2. There is another used to perpetuate fraud, the veil of lack of proof to warrant the piercing of the corporate fiction may not be Paul Pierced! corporate veil. While Michael Chan may be the majority owner of both entities, the same may not be sufficient to establish fraud. Moreover, HEIRS OF UY V. IE BANK: Petitioners herein are there was no proof of a transfer of properties heirs of Fe Uy, shareholder of Goldkey. from Kukan to KIC for the purpose of avoiding Respondent bank executed loans in favor of its liabilities. another firm, Hammer, where Uy’s husband, Manuel Chua, served as its president and general manager. The obligations were secured NASECO GUARDS ASSOCIATION V. NASECO: by properties owned by Goldkey and evinced by NASECO was a subsidiary of PNB established for document later found to have Uy’s forged the purpose of proving manpower and security signature. As the transactions were left unpaid, services for various clients. Petitioner respondent bank filed suit against everyone, represented the security guards of NASECO. A and obtained a judgment that provided for the dispute concerning the CBA arose between the liability of Uy and Goldkey. RD: 1. For the two parties. RD: PNB cannot be held liable for doctrine of piercing the corporate veil to apply, claims against NASECO absent a showing of it must be alleged and proven that fraud and fraud or an illegal intent designed to subvert the bad faith were attendant,or that the officers law. involved knowingly assented to unlawful acts. It is therefore inexplicable why absent even an allegation thereto, would Uy be personally held liable, more so, that her signature was forged. 2. PIONEER INSURANCE V. MORNING STAR: Goldkey’s liability remains as it chose to be an Morning Star was a travel agency that failed to alter ego of Hammer in holding itself to be remit sums due to its Canadian partner, IATA. As surety for the latter’s obligations. Additionally, the amounts were covered by an insurance both corporations share an identity in officers, policy, IATA proceeded against petitioner shareholders, business practices and assets. Pioneer, who for their part, settled the claims. Clearly, the former was a mere adjunct of the By way of subrogation, Pioneer filed suit against latter, designed to evade its obligations. respondents. While it obtained a favorable judgment, the Court of Appeals modified the decision on appeal, absolving individual LANUZA JR. BF CORPORATION: Respondent BF respondents of their solidary liability. Pioneer Corporation did not receive amounts due from now seeks recourse, claiming the transaction its co-respondent Shangri-La, payment for was attended by fraud due to the large amounts constructing a parking lot. Pursuant to an of indebtedness incurred. RD: While the arbitration clause in the contract for the incurring of debts during a distressed period in a purpose of resolving the dispute, BF sought to corporations lifetime may be considered as a have petitioners impleaded as parties as well badge of fraud, the same must be substantiated the same being held severally liable alongside by evidence. Aside from the testimony of a Shangri-La. RD: Absent a showing of fraud or certain Attorney Taggueg whose relationship bad faith or malice, the separate identities of a with the firm was unclear, Pioneer failed to corporation and its directors should not be present financial statement to establish disturbed. Additionally, a party that did not bind Morning Star’s difficulties. In addition, the himself personally to an arbitration proceeding petitioner did not introduce evidence of may not be subsequently forced to participate Morning Star’s ownership over properties that in the same. were allegedly of a dubious nature.
WPM TRADING V. LABAYEN: Respondent GUILLERMO V. USON:
Labayen entered into a contract to operate Accounting-clerk-respondent Uson won an Quickbite, a restaurant owned by WPM Trading. illegal dismissal case against Royal Class Venture. In the course thereof, Labayen contracted CLN As president and general manager of the now to renovate the establishment. CLN was not dissolved firm, petitioner Guillermo was held to able to receive payment, and instituted a suit be solidarily liable during the execution of against Labayen. After an adverse judgment, judgment. Petitioner contests the same on the respondent in turn sought indemnity against ground that the he was belatedly informed of WPM and its president Manlapaz, claiming it the fact and that other directors and officers was the latter and CLN who were responsible were not pursued. RD: 1. As a general rule, for the contract. She obtained a favorable officers may be not be held personally liable for decision and Manlapaz was deemed to be the tortious acts of a corporation. It is only upon solidarily liable. RD: While Manlapaz was the showing of fraud, bad faith or malice that such majority stockholder as well as having liability attaches. Accordingly, Guillermo, as simultaneously served as it President and Royal Class’ president and the officer involved Treasurer, there is no showing that his control with its day-to-day operations, was was used to perpetuate fraud. All the parties responsible for the wrongful dismissal of the knew that the agreement was for the purpose respondent and the subsequent dissolution of of renovating the restaurant owned by WPM. the firm to avoid its obligation. 2. Jurisprudence, Therefore, it cannot be said that the latter was using the “doctrine of piercing the corporate merely a vehicle of Manlapaz to commit fraud veil” has long established the precedent that or wrongdoing. parties who have not been impleaded in a case may still be held liable during the execution of the judgement therefrom. accreditation be found, resulting in the PFF’s status as an unincorporated association. Corporate contract law LOZANO V. DELOS SANTOS: Petitioner Lozano and respondent Anda were the respective HALL V. PICCIO: The parties herein agreed to presidents of opposing transport groups. An establish Far Eastern Lumber and Commercial agreement arose that provided for the merger and Co. However after disputes and of both, and the resulting election in the disagreements, respondents Brown et al. sought combined entity awarded Lozano the to have the entity- which they claimed was an presidency. Anda refused to recognize the same unregistered partnership- dissolved while and continued to collect fees from his former petitioners assailed the suit on the ground of a members. Lozano instituted the present action lack of jurisdiction. Respondent judge found in seeking damages. Respondent judge dismissed favor of Brown et al. and ordered the the suit on the ground that the controversy was dissolution of the enterprise. The petitioners intra-corporate in nature and should be filed a counter-bond to discharge the receiver adjudicated by the SEC. RD: As the combined but the judge refused. RD: As the SEC had not organization was not yet registered with the SEC, yet issued a certificate of registration for the it cannot be gainsaid that the dispute is entity involved, the parties herein may not intra-corporate in nature. The present action claim to be in “good faith” as a corporation. For should be resolved by a regular court as it such a claim to prosper, errors and irregularities involves a dispute over the parties’ agreement must exist as opposed to an utter want to merge. regarding its registration. Accordingly, the cited provision in the Corporation Law anent de facto corporations finds no application. This is a Ultra vires doctrine, business judgement rule dispute between shareholders of an and the doctrine of apparent authority unregistered entity and the court a quo correctly took cognizance of the controversy. MONTELIBANO V. BACOLOD MILLING: Plaintiffs-appellants are planters adhered to the INTERNATIONAL EXPRESS TRAVEL V. CA: respondent’s mill. By virtue of a board Defendant Kahn served as the president of the resolution, a concession was granted to the Philippine Football Federation and entered into planters increasing their share in an amended an agreement with petitioner corporation milling contract. The latter was signed without wherein the latter would provide travel services the resolution appended thereto. Defendant for officials and athletes. Petitioner despite contest the concession as it was made without repeated demands, failed to secure payment consideration and that it was an ultra vires act. from Kahn and the PFF. RD: A voluntary RD: The questioned resolution was passed in unincorporated association, like defendant good faith by the board, and remains valid and Federation has no power to enter into, or to binding regardless of whether the same would ratify a contract. The contract entered into by cause loss to the miller. Accordingly, as long as its officers or agents on behalf of such they were not acting with bad faith or association is binding or, as enforceable against negligence,officers may not be held liable and it. The officers or agents are themselves questions on policy or management are better personally liable. While the law (the Revised left to the discretion of the board. Charter of the Philippine Amateur Athletic Association, RA 3135) provides for the creations of entities called “National Sporting PHIL REALTY V. LEY: Parties herein agreed to Associations”, the same must be recognized and four contracts for the construction of several accredited before it could acquire a juridical buildings.The latter citing increasing costs of personality. Nowhere in the PFF’s charter nor in materials claimed that it could not finish the the evidence adduced by Khan could such an project without an escalation clause. While the board turned down the proposal, such denial is bound by the agreement because of the was not sent to respondent contractor; on the following reasons: (a) it failed to specifically contrary, construction manager Abcede sent a deny the genuineness and due execution of the letter stating that should Ley infuse a certain deed of sale; (b) it had acquiesced to the amount into the project, the escalation clause occupation of the premises by the respondents; may be agreed upon completion of at least (c) as a matter of general practice, or custom, it ninety-five percent of the Tektite building. Ley had previously allowed Tena to transact in continuously sent monthly reports and upon the behalf of the bank and it may not now contest completion of the agreed percentage, the same to prejudice innocent third parties, requested for the release of the amount even if Tena was deemed to have abused her covered in the clause. Petitioner refused on the authority. ground the letter was not signed by the duly authorized individuals. RD: 1.The letter was not a mere letter but a letter-agreement that signed ADVANCE PAPER V. ARMA TRADERS: Arma by Abcede. Over the course of the project, it Traders contest the checks signed for by its was the practice of Ley to approach Abcede or officers on the grounds that the same were not its vice-president over any concerns; duly authorized. The checks covered loans consequently, applying the doctrine of apparent extended by the petitioner. RD: The doctrine of authority, Ley was in acting in good faith when apparent authority was applied. Despite a lack it had assumed that Abcede was clothed with of a board resolution, Tan and Uy were clothed authority and that the proposed escalation with broad authority, including the increasing of clause was approved. indebtedness of Arma Trading. Much import was given to evidence pertaining to the lack of a board or a shareholders’ meeting over the past ATRIUM V . CA: Hi-Cement issued four fourteen years and for the same period, crossed-checks in favor of E.T. Henry and the Advance only dealt with the Tan and Uy and no same were in turn discounted to Atrium. Atrium one else. The laxity by which Arma allowed the then requested confirmation from Hi-Cement two to abuse their powers may not be used as a and its treasure de Leon confirmed the checks. defence to escape its liability from third The checks upon presentment were dishonored, persons. and Atrium sought the collection of the amount due. The court a quo absolved Hi-Cement of any liability as the checks were deemed issued RIOSA V . LA SUERTE: Riosa seeks to annul a without authority by its corporate signatories. deed of sale covering a parcel of land, claiming RD: The act itself of issuing the checks were that the same was presented to him as mere valid corporate acts to secure a loan. evidence of his indebtedness to Sia Pio, Nevertheless, de Leon was guilty of negligence president of La Suerte and that he had signed when she confirmed the checks as being the same without any knowledge that it was a negotiable when it was meant for deposit. deed of sale. He further avers that he has Additionally, Atrium may not be deemed a consistently practiced acts of ownership over holder in due course, having been made aware the property. La Suerte opposes the claim by of the character of the checks. stating it was the lawful owner as shown by title being registered in its name and that it merely tolerated the possession of Riosa. RD:. There is RURAL BANK OF MILAOR V. OCFEMIA: no proof that the loans extended by Pio came Petitioner bank sold foreclosed properties to from La Suerte to have been the consideration respondents. The latter could not register the for the sale. Absent a board resolution, the same as the bank refused their request for the transactions herein partake of the nature of a board resolution required by the Registrar. The loan as opposed to a sale. Moreover, Riosa had bank premise its refusal on account that the consistently practiced acts of ownership such as sale executed by its bank manager Tena was possession and the payment of realty taxes, without the proper authorization. RD: The bank belying the claim that he had intended to part members are employed by Hanjin or even with his property. worse, fraud or the evasion of legal duties. Furthermore, a Department Order has long established that a labor organization’s change Articles of Incorporation of name shall not affect its legal personality.
INDUSTRIAL REFRACTORIES V. CA: Respondent INDIAN CHAMBER OF COMMERCE V. FILIPINO
Refractories Corporation, engaged in the selling INDIAN CHAMBER OF COMMERCE: Petitioner of bricks, seeks to have petitioner, an entity contests the SEC Decision ordering it to change involved in ceramics, change its corporate name, its name. RD: The SEC correctly applied prior having been known prior as Synclaire jurisprudence as respondents had (a) prior right; Manufacturing. The SEC en bank ordered and (b) the disputed name was confusingly petitioner to drop “Refractories” from its similar. corporate name.RD: The SEC has jurisdiction to make sure corporate names for the protection of corporations as well as the public. Amendment of By-Laws
FLEISCHER V. NOLASCO: Plaintiff Fleischer
sought to have the shares he had purchased ZUELLIG FREIGHT V. NLRC: Zeta seeks to avoid from a certain Manuel Gonzalez registered in its liability for illegally dismissing San Miguel as the books of defendant corporation Botica it had ceased its business, as evinced by the Nolasco. By way of special defense, defendant amendment to its Articles of Incorporation, interposed that it had a preferential right to buy providing for a change of its name to “Zuellig the same and that the plaintiff had refused its Freight”. RD: Petitioner, despite its new name, offer to purchase the shares. Subsequently, the was the mere continuation of Zeta’s corporate corporation avers that the registration of the being, and still held the obligation to honor all shares in the defendant’s name would violate of Zeta’s obligations, one of which was to its by-laws. RD: Well-settled is the contention respect San Miguel’s security of tenure. The that a corporation is free to create reasonable dismissal of San Miguel from employment on by-laws pursuant to its purpose, provided that the pretext that petitioner, being a different the same are not inconsistent with the corporation, had no obligation to accept him as prevailing general law on corporations. In this its employee, was illegal and ineffectual. instance, such a restriction in the transfer of GSIS FAMILY BANK V. BPI: Respondent opposed shares would contravene the existing law as the the use by the petitioner of the words “Family latter puts no restriction on the transfer of Bank”. The SEC prohibited the latter from using shares aside from its subsequent registration. the same. RD: The respondent had acquired (a) Moreover, the plaintiff was not privy to such an prior right and that the disputed words were (b) article when he had purchased the disputed identical and confusingly similar. shares. (NOTA BENE: The remedy to compel the registration of shares is an action for mandamus.)
IEMELIF V. LAZARO: Iglesia Evangelista
Metodica was established as a corporation sole SAMAHAN NG MANGGAGAWA SA HANJIN V. by Bishop Zamora. Sometime later, it registered BLR: Inter alia, petitioner assails the decision of a set of by-laws that provided for a Supreme the court a quo ordering to drop the words Consistory of Elders who would in turn manage “Hanjin Shipyard” from its name. RD: While the the affairs of the corporation. In a general right of the petitioner to establish a workers’ conference, its members approved the association cannot be denied, it has to drop the conversion from a corporation sole to a disputed words from its name. The continuance corporation aggregate. Its corporate papers of the same would lead to confusion that all its remained unaltered for some years however, and the SEC subsequently answered in a query and the losses incurred by Monomer made it posted by the corporation that the corporation worthy of an exemption. must amend its articles for the move to push FOREST HILLS V. VERTEX SALES: Forest Hills is a through. This was opposed by a faction of the domestic, non-profit stock corporation church however, raising the issue on whether operating as a golf and country club organized the conversion may be accomplished by mere by Kings Property and Fil-Estate Property. amendments to its articles, as opposed to a Fil-Estate then sold a share of Forest Hills to complete dissolution of the existing corporation. R.S.Asuncion, who prior to payment of full RD: As there is an absence in the Corporation purchase price, transferred the same for the full Code of provisions for the amendment of a amount to respondent Vertex. R.S. Asuncion corporation sole’s articles, pertinent provisions advised Fil-Estate of the transaction and Forest on non-stock corporations may be applied. Hills in turn, granted privileges afforded by the While technically a corporation sole consists of club. Nevertheless, the share remained in the only one person, the requirement for the name of Fil-Estate, leading for an action of concurrence of two-thirds of its membership rescission instituted by Vertex. During the may be employed. pendency thereof, a stock certificate was issued in the name of respondent but the latter refused it. RD: Section (63) of the Corporation Incidental Powers of a Corporation Code provides the following for a valid stock MSCI V. NWPC: Asturias Sugar entered into an transfer: (a) the delivery of the stock certificate; agreement with Monomer Trading wherein the (b) the endorsement of the owner or any latter would acquire the assets of the former on authorized person; (c) to be valid against third the condition that a new entity be created and parties, the recording of the transaction in the the same would be the assignee of such assets. corporate books. As the stock certificate was As a result, respondent corporation Monomer not issued, the transfer was not valid and Sugar was created. After some time, it applied rescission was a proper remedy. Moreover, for wage exemption on the ground that it was a Forest Hills, not being privy to the sale, is not a distressed corporation. Petitioner union proper party to appeal the decision as the opposed the same. RD: NWPC guidelines transaction involved Fil-Estate and Vertex. provide that for a corporation to be considered Nevertheless, the Court found it proper for as distressed, one of the requirement is that Forest Hills to retain the membership fees paid “accumulated losses for two full accounting for by Vertex as the latter enjoyed the privileges periods (including interim periods, if any) have the club had to offer. impaired at least twenty-fiver percent of the paid-up capital”. As such, the resolution therefore lies in the correct computation of UNIVERSITY OF MINDANAO V. BSP: Petitioner’s respondent’s paid-up capital. MSCI contended Vice President for Finance Petalcorin executed that the amount should only be Five Million, several mortgages upon its properties to serve reflecting the amount of the Twenty Million as security for the loan arrangements benefiting worth of subscribed stock actually paid-up. On banks owned by its Chairman Torres. The the other hand, petitioners aver that loans and contract was supported by a Secretary’s assets extended by both Asturias and Monomer Certificate alongside minutes of a meeting, both should be taken into account. The latter being later found to be simulated. Eventually, contention was given short shrift by the Court. Torres’ financial institutions were unable to For an investment to be treated as part of meet its obligation and were liquidated, leading paid-up capital, shares must be issued by a to respondent’s attempt to foreclose the corporation. Moreover, the subsequent mortgage. University of Mindanao denied that increase in capital stock must comply with Petalcorin had authority to enter into such an requirements proscribed by the Corporation arrangement. RD: While the Corporation Code Code. Clearly, none of the aforementioned grants incidental powers to a corporation, its events occurred. Consequently, the correct actions must nevertheless coincide with the amount to be considered should be Five Million purpose stated on its charter. As an educational institution, the University had no power to LOPEZ REALTY V. TANJANGCO: Petitioner realty enter into arrangements that would secure the and respondents were co-owners in equal share liabilities of third persons. Moreover, there of a building, the later being successors of Jose exists a want of a resolution authorizing Tanjangco. The respondents then offered to Petalcorin to contract in behalf of the purchase the realty’s share and the topic was University. discussed in several meetings conducted by its board. Eventually, it was resolved that one of their shareholders, Asuncion Lopez, be given Terms and qualifications of Directors; priority to equal the offer of the respondents. Hold-Over Doctrine As Asuncion did not exercise her option, the remaining directors, while Asuncion was abroad and without notice to the same, resolved in a meting to conduct the sale in favor of the SENERES V. COMELEC: Respondent Robles was Tanjangcos. Aggrieved, LRI and Asuncion sought elected to the presidency of BUHAY, a party-list to annul the sale. It is further alleged by the entity on 1999. For the 2007 elections, Robles respondents that another meeting was submitted a list of nominees. This was opposed subsequently held supposedly ratifying the sale. however by petitioner Seneres who in turn, RD: While the Corporation Code provides alleged that he was the real president as Robles various means by which directors conduct their had vacated the position in 2004. RD: The meetings, the same must be attended by holdover principle applies. Despite the expiry of notices in order to afford persons ample Robles’ term, he is allowed to continue opportunity to attend. Otherwise, the meeting discharging the functions of his office until his is deemed illegal and the act arising therefrom successor is elected or appointed. does not bind the corporation. In addition, infirmities attend the subsequent meeting allegedly ratifying the sale, such as SOUTH COTABATO V. SANTO TOMAS: non-directors signing the minutes; accordingly, Petitioner network was charged with violating the sale could not have been approved by the labor standards laws. Upon reaching the Court board. of Appeals, the case was dismissed on the ground that the petitioner corporation had not appended a board resolution authorizing its BERNAS V. CINCO: Alarmed by the supposed President Benzonan to sign the verification as misuse of funds in the Makati Sports Club, well as the certificate against forum shopping. respondents Cinco et al. sought the removal of RD: It was an error to dismiss the appeal as petitioners Bernas et al., the latter being there was substantial compliance with the officers and directors of the corporation. In a procedural requirements. As President as well special stockholders’ meeting called by the as co-respondent in the case at bar, Benzonan oversight group, Cinco and his group were was qualified to sign the procedural necessities eventually elected as directors and officers. in behalf of South Cotabato. While as a general Bernas contested the validity of the meeting rule, the best practice would be to append arguing that it may only be called by the resolution authorizing an individual to sign in corporate secretary. Another meeting was held behalf of a corporation, in a slew of wherein the members of the club ratified the jurisprudence and on a case to case basis, the actions arising from the first meeting. RD: The Court has deemed it proper to relax the first meeting was improperly called as the by requirements if substantial compliance is -laws of the club, in relation to the Corporation shown. Code, only allows for the President or the Board to call a special meeting. Nowhere in its provisions does a grant of authority to the Meetings oversight committee exist. As the act expelling the Bernas group was void, it could not have been ratified as well in the second meeting. his wife’s shares did not vest in him the rights of a majority shareholder as the transfer was not Doctrine of Corporate Opportunity: recorded in its books. Consequently, the GOKONGWEI V. SEC: Petitioner questions the meeting called by the respondents and the amendment of by-laws by the board that effects arising therefrom are null and void. involved, inter alia, that disqualified persons who had competing interests with San Miguel from election or nomination to the board. RD: INSIGNE V. ABRA VALLEY COLLEGES: San Miguel was well within its rights to impose Respondent corporation refused the inspection reasonable requirements for an individual’s of books on the ground that the petitioner had election to the board; moreover, no vested right refused to surrender their certificates. exists for a shareholder to be elected-there Apparently, the certificates due the petitioners exists an implied acceptance for a shareholder remained in the names of their predecessors in to submit to the will of the majority. Accordingly, interest. RD: A stock certificate is mere prima as director of the corporation, one would serve facie proof of ownership. Accordingly, other as a fiduciary of the company and to means may be adduced to prove the same. In subsequently partake in endeavors that may be this instance, petitioners presented receipts, prejudicial to the entity would be contradictory minutes, the general information sheet,and a to such a purpose. secretary’s certificate to prove their ownership. Consequently, petitioners have the right to inspect the books. Stock Certificate
FERRO CHEMICALS V. GARCIA: Ferro Chemicals
PONCE V. ALSONS CEMENT: Gaid indorsed his sought to purchase shares of Chemical shares to petitioner Ponce. Respondent Industries. An agreement was reached, which corporation refused to issue stock certificates in included a repurchase clause. Antonio Garcia, his name, alleging that the transaction was not president of Chemical Industries later sought to recorded in its book. RD: The proper procedure exercise the same, but having found the amount that the petitioner should have undertaken was tendered insufficient, Ferro assigned its rights to to have the corporation first record the transfer Chemphil. In the meantime, a consortium of in its books and then demand the certificates. banks agreed on a compromise agreement to Absent express instructions thereon, an cover Garcia’s liabilities. As the latter did not indorsement does not afford an automatic right comply, Garcia’s holdings were attached and to register the same, and subsequently, to have the banks eventually won the shares of Garcia certificates issued therefrom. in an auction. But prior to having the sale registered, Chemphil opposing the same, citing ownership on the basis of Ferro’s assignment. For his part, Garcia also instituted cases for F.S VELASCO V. MADRID: Respondent Madrid specific performance to exercise his repurchase called a special meeting on the ground that as right. heir of his late wife, he had inherited the latter’s share in the petitioner-corporation. He then Subsequently, the banks won to have the sale commenced a reorganization of the corporation registered and eventually assigned their rights that resulted in him and his cohorts being over the shares to Gonzales. Chemphil officers and members of the board. At the same proceeded against Ferro who in turn, ceded time, petitioners Velasco et al. also conducted rights over its property to the former in order to elections that resulted in turn, in them being satisfy its obligation. Aggrieved, Ferro filed suit elected as officers of the corporation. against Garcia, Gonzales and Chemical Petitioners sought to have the actions of Madrid Industries for damages, claiming that a nullified. RD: For a transfer to be binding against conspiracy was afoot among the defendants, a corporation, the same should be recorded in holding out the shares to be free from its books. As such,the inheritance by Madrid of encumbrances in order to induce Ferro to or administrator who exercises the deceased purchase the same when the contrary was true. shareholder’s rights.
RD: 1. The consistent efforts of Garcia to
repurchase the shares belie the contention YUJUICO V QUIAMBAO: Petitioner Yujuico, Ferro that fraud was involved. Considering it upon his election as President of STRADEC, was Ferro who proposed the purchased and the sought to have the corporate books and records amounts involved, it would be hard to imagine inspected. However, it appears that respondent where the corporation would not conduct due and his cohorts- who were former officers of diligence in executing the agreement- the liens the corporation- have absconded with the same. on such shares were never hidden. Accordingly, The former then instituted a criminal action and the losses suffered by Ferro can simply be while the first level court found probable cause attributed to a business judgement that did not to issue arrest warrants against the respondent, work out to its favor. 2. Navarro, as corporate the Regional Trial Court dismissed the case, secretary, cannot be held liabile for a tort as he citing a want of demand (aside from a letter), was not privy to the contract. In additions, liens that one of the officers had already turned over and encumbrances are not required to be kept a few files and the lack of evidence supporting on the stock and transfer book; only absolute the contention that the books were in the transfers are. possession of the respondents. In addition, the lower court opined that the stock and transfer book sought by petitioners was not within the TENG V. SEC: Respondent Ting purchased TCL ambit of the “corporate records” provided for in shares from several individuals. He then the Corporation Code. RD: 1. The stock and requested petitioner-corporate secretary to transfer book is included in the inspection right record the same and issue new certificates in of a shareholder. 2. The violation of a his name. TCL and Teng refused on the ground shareholder’s right to inspect should be that the old certificates must be directed against officers of a corporation. As the surrendered.RD: Delivery is the operative fact respondents herein were not, the present suit that transfers ownership, not the surrender of cannot be maintained. Another recourse, one the certificates. The corporation may not seeking to enforce the proprietary rights of demand the same as a requirement prior STRADCOR over such papers, should be registration. pursued.
TERELAY INVESTMENT V. YULO: Respondent
sought to inspect the corporate books and petitioner corporation refused. RD: 1. Rights and Obligations of Shareholders Shareholders, as a matter of right should be afforded the right to inspect the books. Only in certain instances such as the revelation of PUNO V. PUNO ENTERPRISES: The petitioner corporate secrets or to secure prospects or to herein was an alleged heir of Carlos Puno, an discover technical defects to commence strike incorporator of respondent corporation. suits or blackmail the corporation may it refuse. Accordingly, upon the death of Carlos, the 2. The status of Cecilia as a shareholder was not former sought to inspect the corporate books in objected to by Terelay, having admitted that the action for specific performance. The case was former was registered. In addition, the fact of dismissed on the ground that the petitioner was whether she was the donee of the shares was not a registered shareholder. RD: Heirs are a proper subject of the lower court acting as a mere equitable holders upon the death of a corporate court, as opposed to one that settles shareholder. Until a settlement of the the estate of Cecilia’s father. decedent’s estate is reached, it is the executor PHILIPPINE ASSOCIATED SMELTING V. LIM: the greater number as a basis for the quorum Petitioner corporatin was granted injunctive should be used. relief against the right of respondent - shareholders to inspect the corporate books. RD: Injunctive relief is afforded when there (a) is an GUY V. GUY: Goodland Company Incorporated actual right; (b) an invasion of such a right; and was a family corporation where petitioner who (c) urgency and necessity to prevent serious served as director and shareholder, and where damage or irreparable injury. Clearly, a respondents were shareholders as well. The corporation has no right to enjoin a shareholder dispute arose when petitioner Simny Guy from inspecting its books. alleged that he received notice for a special meeting that resulted in the election of respondents as officers fifteen days late. In addition, petitioner contests the authority of Gilbert Guy who served as Vice-President to call CHUA V. PEOPLE: Joselyn Chua, a shareholder such meeting. Respondents aver that the notice of Chua Te Corporation, sought to inspect the had been sent in accordance with its by-laws books and records of the corporation. Despite that provided for at least five days and that the her written demands, petitioners herein- infirmity if any, had been corrected by a officers and the custodian of the records- subsequent general meeting. RD: 1. The refused. They raised the defense that the Corporation Code does not require actual corporation had already ceased its affairs and receipt but rather mandates a time period by the right invoked by Joselyn did not exits. which a notice is sent prior a special meeting. 2. However, petitioners were convicted . RD: The The by-laws of Goodland allow the cessation of a corporation does not Vice-President to exercise all the powers of the automatically deprive the shareholder of his or President in case the latter’s inability or absence; her right of inspection. Moreover, as the OSG accordingly, Gilbert was well within his rights to pointed out, the Corporation Code provides for call for a special meeting. 3. Grace Cheu was not a period of three years in which a corporation a shareholder as her name was not recorded in settles its affairs, including an inspection of its the stock and transfer book. books by a shareholder.
Derivative Suit Meetings
HI-YIELD REALTY V. CA: Respondent Roberto
LANUZA V. CA: A dispute had arisen on Torres as minority shareholder and in behalf of whether a meeting called for the purpose of Honorio Torres and Sons Incorporated electing directors of the Philippine Merchant instituted the present suit for annulment of Marine School had the proper quorum. It mortgage and foreclosure in the principal place appears that while the articles of incorporation of business of Torres Incorporated, Makati. listed a greater number of outstanding capital Torres was also contesting the actions of its stock, the stock and transfer book had merely majority shareholder Leonora that led to the recorded thirty-three common shares. RD: mortgages and foreclosure of properties in The articles of incorporation serve as the Marikina and Quezon City. Petitioner insists that charter by which a corporation’s relationship the action should have been made as it was a with the State, its shareholders, and other real action and the venue was improperly laid. persons is defined. In contrast with a stock and RD: The present action is a derivative suit and transfer book which merely records transactions Roberto had complied with the requirements involving its shares and may be impeached by thereof, namely: (a) the party bringing suit is a other evidence, the articles are binding on the shareholder; (b) the same has exhausted all corporation and its shareholders. Consequently, remedies with the corporation; and (c) the cause of action refers to harm or injury that may befall or has befallen to the corporation. CHUA V. CA: Respondent Hao, treasurer of Accordingly, it was not proper to dismiss the Siena Realty, insitituted the complaint for case as the venue was correct. falsification alleging that petitioner Chua and his wife, falsified minutes of a meeting and made it appear she was present thereto. The complaint YU V. YUKAYGUAN: Both parties herein are against the wife was dismissed while petitioenr shareholders of Wincheter Incorporated. was arraigned and trial ensued. RD: While the Petitioner and incorporator Anthony Yu was the civil aspect of the criminal suit is generally older half-brother of respondent Joseph. deemed instituted thereto, the corporation Respondents initiated the present action as a must be impleaded for the same to be derivative suit as well as seeking to inspect its appreciated as a derivative suit. corporate books and records. They also allege that petitioners have mismanaged the corporation and that shares that were in the CUA V. TAN: Philippine Racing Club was a name of Anthony were paid with Joseph’s corporation established for the purpose of money, making the former a trustee. RD: conducting a horse racing business. As it For a derivative suit to be appreciated, the intended to develop one of its properties, it requirements thereto must be complied with; decided to acquire another company, JTH, to respondent had not exhausted all remedies accomplish such a task. The resolution was available by directing his concerns with the subsequently approved by the majority in board in a meeting, nor did he allege that no shareholders’ meetings. Respondent Dulay et al. appraisal rights were available. assail the actions of petitioners in executing the plan, alleging undue haste and a lack of transparency prejudicial to the interests of PRCI. FILIPINAS PORT SERVICES V.GO: Petitioner Cruz They also allege that the majority directors was the former president of Filport and assailed were not officially nominated as board the creation of an executive committee and members, rendering the actions they have new positions for respondents and in a letter, undertaken as void. In the meantime, another sought the return of salaries granted thereto. resolution was approved by the board After the apparent inaction of the board, he proposing a property for shares exchange.An then instituted the present action for damages injunction was obtained preventing the in behalf of Filport, arising from the approval of the intended plan. RD: The present mismanagement of the respondents of the action partakes of a nature of a derivative suit, corporation. RD: 1. The present action is of a primarily for the (a) the approval of the first derivative suit and Cruz had substantially plan to acquire JTH; and (b) the approval of the complied with the requirements imposed by law. property for shares exchange plan. Accordingly, While as a general rule, the shareholder must the first dispute had been rendered moot by the exhaust all remedies available to the approval of the majority while the latter corporation, exceptions arise such as in this controversy should be dismissed as it did not instance, when demands upon the board would comply with the procedural requirements be a nullity as it remained under the complete imposed upon derivative suits-it did not allege control of the defendants. 2. Nevertheless, the the non-availability of appraisal rights. Lastly, suit should not prosper. The disputed the claim that respondents were prevented committee, despite not being in the by-laws, from inspecting books should be denied as they was not illegal and well within the powers of the were given opportunities to inspect statements board to create. In addition, the salaries regarding the proposed plan. complained were reasonable in relation to the responsibilities involved and were not even paid for any injury to the corporation to be ANG V. SPOUSES ANG: Sunrise Marketing is appreciated. family owned corporation whose management rests with respondents. Nancy Ang, sister of the parties herein, extended a loan to both parties settle the obligations of Sunrise as well as the The nature of the complaint lies in being a purchase of various properties. The obligation derivative suit. Petitioners allege fraud in the was eventually settled by Juanito employing actions of the board concerning the movement mortgages over various properties owned by of shares towards Rogelio’s group. Accordingly, petitioner Juanito, respondent Roberto, and the harm done was not unique to the Marcelino Sunrise. Juanito then instituted the present faction but to the entire corporation itself. As an action alleging mismanagement by Roberto and indispensable party, the corporation should his refusal to settle his part of the obligation. RD: have been impleaded. The action is not in nature of a derivative suit as there is no showing that the same accrues to the corporation. The loan extended was a Corporate Acquisition personal obligation to the parties herein, and the corporation not privy to it. The mortgage over Sunrise’s properties is of no effect as MINDANAO SAVINGS AND LOAN V. WILLIKOM: Juanito, despite being a shareholder, had no MSLAI was borne out of a unregistered merger right to encumber the land- only the board may of two entities engaged in savings and loans. do the same. This endeavor did not succeed however, resulting in the liquidation of the same. Prior to its closure however, a collection suit was VILLAMOR JR. V. UMALE: PPC by virtue of its instituted by respondent Uy against FISLAI, one board waived its leasing rights in favor of of the predecessors of MSLAI, and obtained a petitioner Attorney Villamor. Balmores (later favorable judgement,resulting in the foreclosure substituted by respondent Umale) filed an of several properties. In the ensuing sale, individual suit contesting the same. RD: The respondent Willikom was the highest bidder cause of action pursued by Balmores accrues to and received title thereto. MSLAI questions the corporation and therefore, should have the sale on the ground that it now became the been instituted in a derivative suit. Accordingly, owner of the disputed property after the he had not complied with the requisites thereof merger. RD: 1. For a merger to be valid and by not alleging the lack of appraisal rights effective, it must be registered with the SEC and available to him. the latter shall accordingly issue a certificate accrediting the same. Consequently, the assets and liabilities of each entity remained distinct CHING V. SUBIC BAY: Petitioners Ching et al.are and separate. MSLAI had no right to question shareholders of Subic Bay Golf Club contesting the sale of FISLAI’s properties. 2. The principle the amendment of its articles by the board, of novation does not apply either, as the depriving its shareholders of proprietary rights. express consent of Uy was not obtained. The They also allege mismanagement involving assumption of FISLAI’s liabilities by MSLAI did funds and fraud in not disclosing the true state not result in the substitution of debtors that of transactions involving the club. RD: The would exempt such prop erties from execution. present action is a derivative suit as the cause of action accrues to the corporation. Accordingly, it must comply with legal requisites for the BPI V. BPI EMPLOYEES UNION: Petitioner bank same to be recognized. Ching et al. had not invokes its merger with Far East Bank to exempt exhausted prior remedies available to the absorbed employees from the coverage of a corporation. union shop clause existing in the CBA with it present employees. RD: (2010): Employees are neither assets nor liabiities that are to be FLORETE V. FLORETE: Two factions of a family treated like chattel during a merger. Both owned corporation, PBS, are involved in a parties- employer and employees- have a dispute concerning the ownership of its shares. concomitant right to continue their relationship Petitioners contest the subsequent increase and of employment with one another; as such, the transfer of stock owned by respondents. RD: provision concerning the union shop would now apply to those who choose to continue with BPI. lies in the “free and harmless”clause enshrined (2011) While the application of the union shop in the memorandum and seek recourse against clause remained, the automatic assumption Arayat’s president. theory is now in effect- BPI becomes the successor of employer of the employees, having the right to terminate the same at a later date. PHILIPPINE GEOTHERMAL EMPLOYEES UNION V. UNOCAL: Petitioner union sought separation benefits as it alleges the merger of Unocal BANK OF COMMERCE V. RADIO PHILIPPINES California with Chevron et al. resulted in the NETWORK: Traders Royal Bank and petitioner closure of Unocal Philippines. and the implied Bank agreed to a Purchase and Assumption dismissal of the employees. Respondent agreement wherein the later would purchase opposes the same averring that it was not a the former’s assets alongside its liabilities. The party to the merger and it still continues to BSP approved the same premised upon the subsist. RD: Whether the Unocal Philippines was condition that an escrow fund be set up to a branch or subsidiary is of no import to the address any contingent claims. An adverse employees involved herein- if it was a branch, a judgment was set against Traders in favor of merger does not serve as a termination of respondents who for their part, proceeded employment of the absorbed employees; if it against Bank of Commerce as opposed to the was a subsidiary, it has a distinct personality escrow fund, on the theory that a merger had from it parent company and the merger has no occurred between the two entities. RD: 1. No effect on their employment. Moreover, a merger had occurred as the requirements set merger is not an instance wherein a claim for forth in the Corporation had not been complied separation pay may be appreciated. with; neither does a “de facto” merger apply in this instance as there was no substantial transfer of assets exchanged for equity. What Religious Corporations merely occurred was a sale of assets couple with an assumption of liabilities. The two entities had clearly intended to continue as IFI V. TAEZA: Plaintiff was the owner of a lot separate corporations. that was further subdivided into smaller parcels. Its Supreme Bishop Ga, entered into several transactions alienating the properties, one of Y-I LEISURE V. YU: Respodent Yu sought to which was a sale conducted in favor of Bernardo recover sums he paid to Mount Arayat for Taeza, the respondents’s predecessor in interest. shares in a golf and country club that was Petitioner-religious corporation assails the sales non-existent. Yu obtained a favorable judgment, of its lands as done without authority. RD: later modifed by the court a quo to include While the Corporation Code allows a petitioners. It appears Mount Arayat had sold all corporation acquire or alienate property, the its assets to petitioner. RD: As a general rule, same may be tempered rules or regulation of the transfer of all an enterprise’s assets shall the church. In this instance, pursuant to the not render the transferee liable unless (cf. Nell canons of the church, Ga’s power required the Rule): (a) an agreement, express or implied, to concurrence of other individuals- the layman’s assume all debts exists; (b) the transaction council had long voiced its objection over Ga’s equates to a consolidation or merger; (c) the actions. Consequently, the alienation occuring purchasing corporation serves as the without authority, it must be stated that the continuation of the other (business enterprise contract of sale was unenforceable. (Cf. transfer); and (d) the transaction was attended Constructive trust). by fraud, for the purpose of evading liabilities. In this instance, as Mount Arayat had transferred all of its assets to Y-I, the latter was Dissolution deemed to be a continuation of a former, and therefore liable for Yu’s claim. The remedy of Y-I VIGILIA V. PHILIPPINE COLLEGE OF the same, thus depriving the former its capacity CRIMINOLOGY: Petitioners herein are dismissed to sue. RD: The Corporation Code provides for a employees of MBMSI, a corporation engaged in period of three years from the termination of its the performance of janitorial services. Attorney existence in order to initiate or defend itself Seril, who served as President and Manager of from suits- ie. to convey its affairs to any trustee the corporation, also served as Vice-President of with the period. More than three years had respondent college. As MBMSI’s certificate of lapsed before the petitioner initiated the incorporation was revoked, the college present action. Additionally, the litany of cases terminated the relationship with the former, invoked by petitioner does not apply as their leading to the dismissal of the employees. cases were pending prior to their dissolution. Petitioners allege that the MBMSI was a mere adjunct of the college and that they were regular employees thereof; accordingly, the Foreign Corporations institution should be held liable for their claims. Respondent college presented several CARGILL V. INTRA-STRATA: Cargill sought to quitclaims and waivers to counter the argument. import molasses from Northern Mindanao RD: 1. The quitclaims were valid in form and in Corporation, with the respondent issuing the substance, having been knowingly and performance bond. As NMC did not meet its voluntarily entered into as well as having been obligation, Cargill sought recompense with notarized. The petitioners’ claims of forgery as respondent after a subsequent compromise well as any other irregularity attending the agreement did not materialize. RD: To same are merely self-serving. 2. The three year constitute doing business, the activity must period refers to the conveyance of the involve profit-taking. The mere importation of corporation to its trustees; accordingly, if a products or goods is not within such a definition. complete liquidation may not be completed Moreover, Cargill never had an office nor an within such a period, it may continue after. The agent in the country to pursue its interests, quitclaims and waivers executed by the aside from an independent contractor it had petitioner fall within such purview. hired to solicit purchases. Accordingly, Cargill had the required standing to file suit.
AGUIRRE II V. FQB: Petitioner instituted a suit
questioning the validity of a meeting held by stockholders and sought to inspect FQB’s ABOITIZ V. INSURANCE COMPANY OF NORTH corporate books. Moreover, members of the AMERICA: MSAS Cargo entered into an “all-risk” disputed board tried to take possession of the policy with ICNA UK. It then shipped its cargo corporate farm which was in the hands of with Aboitiz, subsequently suffering from water co-petitioner Fidel. In the meantime, the SEC damage. ICNA settled the claim, and through had revoked the registration of FQB for not subrogation, sought recompense with Aboitiz. complying with reportorial requirements RD: As a general rule, foreign corporations Respondent now assail the capacity of without a license may not institute suits in petitioners to bring suit. RD: An intra-corporate Philippines court. An exception arises however dispute remains even after the dissolution of a in this instance when a foreign insurance corporation. company seeks relief arising from an isolated transaction. In addition, the entity that brought forth the suit was its domestic agent. ALABANG DEVELOPMENT V. ALABANG HILLS VILLAGE: Respondent homeowners association constructed a multi-purpose hall and swimming pool without petitioner developer’s consent. The suit filed by the petitioner was opposed by the respondent on the ground that its corporate existence had ceased as the SEC had revoked