MENDOZA, JURIS RENIER C.

LLB – 3 CORPORATION LAW (WEEKDAY

CLASS)

Title: METROPOLITAN BANK & TRUST COMPANY, INC. (AS SUCCESSOR-IN-

INTEREST OF THE BANKING OPERATIONS OF GLOBAL BUSINESS BANK, INC.
FORMERLY KNOWN AS PHILIPPINE BANKING CORPORATION), PETITIONER, VS. THE
BOARD OF TRUSTEES OF RIVERSIDE MILLS CORPORATION PROVIDENT AND
RETIREMENT FUND, REPRESENTED BY ERNESTO TANCHI, JR., CESAR SALIGUMBA,
AMELITA SIMON, EVELINA OCAMPO AND CARLITOS Y. LIM, RMC UNPAID EMPLOYEES
ASSOCIATION, INC., AND THE INDIVIDUAL BENEFICIARIES OF THE PROVIDENT AND
RETIREMENT FUND OF RMC, RESPONDENTS.
Citation: G.R. No. 176959, September 08, 2010

Facts: A Provident and Retirement Plan was established by RMC for its regular
employees. Paragraph 13 of the Plan likewise provided that the Plan "may be
amended or terminated by the Company at any time on account of business
conditions, but no such action shall operate to permit any part of the assets of the
Fund to be used for, or diverted to purposes other than for the exclusive benefit of
the members of the Plan and their ... beneficiaries. In no event shall any part of
the assets of the Fund revert to [RMC] before all liabilities of the Plan have been
satisfied."

Later on, the Board of Trustees of RMCPRF entered into an Investment

Management Agreement with Philbank. Pursuant to the Agreement, petitioner
shall act as an agent of the Board and shall hold, manage, invest and reinvest the
Fund in Trust Account No. 1797 in its behalf. The Agreement shall be in force for
one (1) year and shall be deemed automatically renewed unless sooner
terminated either by petitioner bank or by the Board.

In 1984, RMC ceased business operations. Nonetheless, petitioner continued to

render investment services to respondent Board. In a letter dated September 27,
1995, petitioner informed respondent Board that Philbank's Board of Directors had
decided to apply the remaining trust assets held by it in the name of RMCPRF
against part of the outstanding obligations of RMC.

Subsequently, respondent RMC Unpaid Employees Association, Inc. (Association),

representing the terminated employees of RMC, learned of Trust Account No.
1797. Through counsel, they demanded payment of their share in a letter dated
February 4, 1997. When such demand went unheeded, the Association, along
with the individual members of RMCPRF, filed a complaint for accounting against
the Board and its officers, namely, Ernesto Tanchi, Jr., Carlitos Y. Lim, Amelita G.
Simon, Evelina S. Ocampo and Cesar Saligumba, as well as petitioner bank.

On June 2, 1998, during the trial, the Board passed a Resolution in court declaring
that the Fund belongs exclusively to the employees of RMC. It authorized
petitioner to release the proceeds of Trust Account No. 1797 through the Board, as
the court may direct. Consequently, plaintiffs amended their complaint to include
the Board as co-plaintiffs.
On June 27, 2002, the RTC rendered a decision in favor of respondents. On appeal,
the CA affirmed the trial court. It held that the Fund is distinct from RMC's
account in petitioner bank and may not be used except for the benefit of the
members of RMCPRF. Citing Paragraph 13 of the Plan, the appellate court
stressed that the assets of the Fund shall not revert to the Company until after the
liabilities of the Plan had been satisfied.

Issue: Whether or not the proceeds of the RMCPRF may be applied to satisfy
RMC’s debt to Philbank.

Ruling: No. The Supreme Court held that a trust is a "fiduciary relationship with
respect to property which involves the existence of equitable duties imposed upon
the holder of the title to the property to deal with it for the benefit of another." A
trust is either express or implied. Express trusts are those which the direct and
positive acts of the parties create, by some writing or deed, or will, or by words
evincing an intention to create a trust.

Here, the RMC Provident and Retirement Plan created an express trust to provide
retirement benefits to the regular employees of RMC. RMC retained legal title to
the Fund but held the same in trust for the employees-beneficiaries. Thus, the
allocation under the Plan is directly credited to each member's account.

The trust was likewise a revocable trust as RMC reserved the power to terminate
the Plan after all the liabilities of the Fund to the employees under the trust had
been paid. Paragraph 13 of the Plan provided that "[i]n no event shall any part of
the assets of the Fund revert to the Company before all liabilities of the Plan have
been satisfied."

Employees' trusts or benefit plans are intended to provide economic assistance to

employees upon the occurrence of certain contingencies, particularly, old age
retirement, death, sickness, or disability. They give security against certain
hazards to which members of the Plan may be exposed. They are independent
and additional sources of protection for the working group and established for
their exclusive benefit and for no other purpose. Here, while the Plan provides for
a reversion of the Fund to RMC, this cannot be done until all the liabilities of the
Plan have been paid. And when RMC ceased operations in 1984, the Fund
became liable for the payment not only of the benefits of qualified retirees at the
time of RMC's closure but also of those who were separated from work as a
consequence of the closure.

Under Section 122 of the Corporation Code, a dissolved corporation shall

nevertheless continue as a body corporate for three (3) years for the purpose of
prosecuting and defending suits by or against it and enabling it to settle and close
its affairs, to dispose and convey its property and to distribute its assets, but not
for the purpose of continuing the business for which it was established. Within
those three (3) years, the corporation may appoint a trustee or receiver who shall
carry out the said purposes beyond the three (3)-year winding-up period. Thus, a
trustee of a dissolved corporation may commence a suit which can proceed to
final judgment even beyond the three (3)-year period of liquidation.

In the same manner, during and beyond the three (3)-year winding-up period of
RMC, the Board of Trustees of RMCPRF may do no more than settle and close the
affairs of the Fund. The Board retains its authority to act on behalf of its
members, albeit, in a limited capacity. It may commence suits on behalf of its
members but not continue managing the Fund for purposes of maximizing profits.
Here, the Board's act of issuing the Resolution authorizing petitioner to release
the Fund to its beneficiaries is still part of the liquidation process, that is,
satisfaction of the liabilities of the Plan, and does not amount to doing business.
Hence, it was properly within the Board's power to promulgate.
Title: ALABANG CORPORATION, DEVELOPMENT PETITIONER, VS. ALABANG HILLS
VILLAGE ASSOCIATION AND RAFAEL TINIO, RESPONDENTS.
Citation: G.R. No. 187456, June 02, 2014

Facts: Alabang Development Corporation (ADC) filed a complaint for injunction

and damagaes before the RTC of Muntinlupa City against respondents Alabang
Hills Village Association and Rafael Tinio being the president of the latter. The
Complaint alleged that [petitioner] is the developer of Alabang Hills Village and
still owns certain parcels of land therein that are yet to be sold, as well as those
considered open spaces that have not yet been donated to [the] local government
of Muntinlupa City or the Homeowner's Association. Sometime in September
[2006], ADC learned that AHVAI started the construction of a multi-purpose hall
and a swimming pool on one of the parcels of land still owned by ADC without the
latter's consent and approval, and that despite demand, AHVAI failed to desist
from constructing the said improvements. ADC thus prayed that an injunction be
issued enjoining defendants from constructing the multi-purpose hall and the
swimming pool at the Alabang Hills Village.

The RTC denied the complaint for the reason that the petitioner lacks the capacity
to sue. The appellate court affirmed the decision of the RTC, ruling that the
petitioner was already defunct and it no longer had capacity to file the said
complaint.

Hence this present petition.

Issue: Whether or not petitioner in this case lacks the capacity to sue.

Ruling: Yes. Section 122 of the Corporation Code provides as follows:

SEC. 122. Corporate liquidation. Every corporation whose charter expires by its
own limitation or is annulled by forfeiture or otherwise, or whose corporate
existence for other purposes is terminated in any other manner, shall
nevertheless be continued as a body corporate for three (3) years after the time
when it would have been so dissolved, for the purpose of prosecuting and
defending suits by or against it and enabling it to settle and close its affairs, to
dispose of and convey its property and to distribute its assets, but not for the
purpose of continuing the business for which it was established.

At any time during said three (3) years, said corporation is authorized and
empowered to convey all of its property to trustees for the benefit of
stockholders, members, creditors, and other persons in interest. From and after
any such conveyance by the corporation of its property in trust for the benefit of
its stockholders, members, creditors and others in interest, all interest which the
corporation had in the property terminates, the legal interest vests in the
trustees, and the beneficial interest in the stockholders, members, creditors or
other persons in interest.
Upon winding up of the corporate affairs, any asset distributable to any creditor or
stockholder or member who is unknown or cannot be found shall be escheated to
the city or municipality where such assets are located.

Except by decrease of capital stock and as otherwise allowed by this Code, no

corporation shall distribute any of its assets or property except upon lawful
dissolution and after payment of all its debts and liabilities.

In the instant case, there is no dispute that petitioner's corporate registration was
revoked on May 26, 2003. Based on the above-quoted provision of law, it had
three years, or until May 26, 2006, to prosecute or defend any suit by or against
it. The subject complaint, however, was filed only on October 19, 2006, more than
three years after such revocation.

Here, petitioner filed its complaint not only after its corporate existence was
terminated but also beyond the three-year period allowed by Section 122 of the
Corporation Code. Thus, it is clear that at the time of the filing of the subject
complaint petitioner lacks the capacity to sue as a corporation. To allow petitioner
to initiate the subject complaint and pursue it until final judgment, on the ground
that such complaint was filed for the sole purpose of liquidating its assets, would
be to circumvent the provisions of Section 122 of the Corporation Code.

As to the last issue raised, the basic and pivotal issue in the instant case is
petitioner's capacity to sue as a corporation and it has already been settled that
petitioner indeed lacks such capacity. Thus, this Court finds no cogent reason to
depart from the ruling of the CA finding it unnecessary to delve on the other
issues raised by petitioner.ii
Title: CARLOS GELANO AND GUILLERMINA MENDOZA DE GELANO, PETITIONERS,
VS. THE HONORABLE COURT OF APPEALS AND INSULAR SAWMILL, INC.,
RESPONDENTS.
Citation: G.R. No. L-39050, February 24, 1981

Facts: Private respondent Insular Sawmill, Inc. is a corporation organized on

September 17, 1945 with a corporate life of fifty (50) years, or up to September
17, 1995, with the primary purpose of carrying on a general lumber and sawmill
business. To carry on this business, private respondent leased the paraphernal
property of petitioner-wife Guillermina M. Gelano at the corner of Canonigo and
Otis, Paco, Manila for P1,200.00 a month. It was while private respondent was
leasing the aforesaid property that its officers and directors had come to know
petitioner-husband Carlos Gelano who received from the corporation cash
advances on account of rentals to be paid by the corporation on the land.

On various occasions from May 4, 1948 to September 11, 1949 petitioners

husband and wife also made credit purchases of lumber materials from private
respondent with a total price of P1,120.46 in connection with the repair and
improvement of petitioners' residence. On November 9, 1949 partial payment was
made by petitioners in the amount of P91.00 and in view of the cash discount in
favor of petitioners in the amount of P83.00, the amount due private respondent
on account of credit purchases of lumber materials is P946.46 which petitioners
failed to pay.

On July 14, 1952, in order to accommodate and help petitioners renew previous
loans obtained by them from the China Banking Corporation, private respondent,
through Joseph Tan Yoc Su, executed a joint and several promissory note with
Carlos Gelano in favor of said bank in the amount of P8,000.00 payable in sixty
(60) days. For failure of Carlos Gelano to pay the promissory note upon maturity,
the bank collected from the respondent corporation the amount of P9,106.00
including interests, by debiting it from the corporation's current account with the
bank. Petitioner Carlos Gelano was able to pay private respondent the amount of
P5,000.00 but the balance of P4,106.00 remained unsettled. Guillermina M.
Gelano refused to pay on the ground that she had no knowledge about the
accommodation made by the corporation in favor of her husband.

On May 29, 1959 the corporation, thru Atty. German Lee, filed a complaint for
collection against herein petitioners before the Court of First Instance of Manila.
Trial was held and when the case was at the stage of submitting memorandum,
Atty. Lee retired from active law practice and Atty. Eduardo F. Elizalde took over
and prepared the memorandum.

In the meantime, private respondent amended its Articles of Incorporation to

shorten its term of existence up to December 31, 1960 only. The amended Articles
of Incorporation was filed with, and approved by the Securities and Exchange
Commission, but the trial court was not notified of the amendment shortening the
corporate existence and no substitution of party was ever made. On November
20, 1964 and almost four (4) years after the dissolution of the corporation, the
trial court rendered a decision in favor of private respondent. On appeal, the CA
modified the decision finding the spouses jointly liable. Hence the present
petition.

Issue: Whether or not a corporation, whose corporate life had ceased by the
expiration of its term of existence, could still continue prosecuting and defending
suits after its dissolution and beyond the period of three (3) years provided for
under Act No. 1459, otherwise known as the Corporation Law, to wind up its
affairs, without having undertaken any step to transfer its assets to a trustee or
assignee.

Ruling: Yes. Section 77 of the Corporation Law provides that the corporation shall
"be continued as a body corporate for three (3) years after the time when it would
have been x x x dissolved, for the purpose of prosecuting and defending suits by
or against it x x x," so that, thereafter, it shall no longer enjoy corporate existence
for such purpose. For this reason, Section 78 of the same law authorizes the
corporation," at any time during said three years x x x to convey all of its property
to trustees for the benefit of members, stockholders, creditors and other
interested," evidently for the purpose, among others, of enabling said trustees to
prosecute and defend suits by or against the corporation begun before the
expiration of said period.

When Insular Sawmill, Inc. was dissolved on December 31, 1960, under Section 77
of the Corporation Law, it still has the right until December 31, 1963 to prosecute
in its name the present case. After the expiration of said period, the corporation
ceased to exist for all purposes and it can no longer sue or be sued.

The word "trustee" as used in the corporation statute must be understood in its
general concept which could include the counsel to whom was entrusted in the
instant case, the prosecution of the suit filed by the corporation. The purpose in
the transfer of the assets of the corporation to a trustee upon its dissolution is
more for the protection of its creditor and stockholders. Debtors like the
petitioners herein may not take advantage of the failure of the corporation to
transfer its assets to a trustee, assuming it has any to transfer which petitioner
has failed to show, in the first place. To sustain petitioners' contention would be to
allow them to enrich themselves at the expense of another, which all enlightened
legal systems condemn.
Title: CARGILL, INC., PETITIONER, VS. INTRA STRATA ASSURANCE CORPORATION,
RESPONDENT
Citation: G.R. No. 168266, March 05, 2010

Facts: Petitioner Cargill, Inc. (petitioner) is a corporation organized and existing

under the laws of the State of Delaware, United States of America. Petitioner and
Northern Mindanao Corporation (NMC) executed a contract dated 16 August 1989
whereby NMC agreed to sell to petitioner 20,000 to 24,000 metric tons of
molasses, to be delivered from 1 January to 30 June 1990 at the price of $44 per
metric ton. The contract provides that petitioner would open a Letter of Credit
with the Bank of Philippine Islands. Under the "red clause" of the Letter of Credit,
NMC was permitted to draw up to $500,000 representing the minimum price of
the contract upon presentation of some documents.

The contract was amended three times. In compliance with the third amendment,
respondent Intra Strata Assurance Corporation (respondent) issued on 10 October
1990 a performance bond in the sum of P11,287,500 to guarantee NMC's delivery
of the 10,500 tons of molasses, and a surety bond in the sum of P9,978,125 to
guarantee the repayment of downpayment as provided in the contract.

NMC was only able to deliver 219.551 metric tons of molasses out of the agreed
10,500 metric tons. Thus, petitioner sent demand letters to respondent claiming
payment under the performance and surety bonds. When respondent refused to
pay, petitioner filed on 12 April 1991 a complaint for sum of money against NMC
and respondent. The trial court rendered a decision in favor of the petitioner. On
appeal, the appellate court reversed the decision of the lower and dismissed the
appeal. Hence, this present petition.

Issue: Whether or not petitioner, an unlicensed foreign corporation, has legal

capacity to sue before Philippine courts.

Ruling: Yes. Under Article 123 of the Corporation Code, a foreign corporation
must first obtain a license and a certificate from the appropriate government
agency before it can transact business in the Philippines. Where a foreign
corporation does business in the Philippines without the proper license, it cannot
maintain any action or proceeding before Philippine courts as provided under
Section 133 of the Corporation Code:

Sec. 133. Doing business without a license. - No foreign corporation transacting

business in the Philippines without a license, or its successors or assigns, shall be
permitted to maintain or intervene in any action, suit or proceeding in any court
or administrative agency of the Philippines; but such corporation may be sued or
proceeded against before Philippine courts or administrative tribunals on any
valid cause of action recognized under Philippine laws.

hus, the threshold question in this case is whether petitioner was doing business
in the Philippines. The Corporation Code provides no definition for the phrase
"doing business." Nevertheless, Section 1 of Republic Act No. 5455 (RA 5455),
provides that:

x x x the phrase "doing business" shall include soliciting orders, purchases,

service contracts, opening offices, whether called `liaison' offices or branches;
appointing representatives or distributors who are domiciled in the Philippines or
who in any calendar year stay in the Philippines for a period or periods totalling
one hundred eighty days or more; participating in the management, supervision
or control of any domestic business firm, entity or corporation in the Philippines;
and any other act or acts that imply a continuity of commercial dealings or
arrangements, and contemplate to that extent the performance of acts or works,
or the exercise of some of the functions normally incident to, and in progressive
prosecution of, commercial gain or of the purpose and object of the business
organization.

Since respondent is relying on Section 133 of the Corporation Code to bar

petitioner from maintaining an action in Philippine courts, respondent bears the
burden of proving that petitioner's business activities in the Philippines were not
just casual or occasional, but so systematic and regular as to manifest continuity
and permanence of activity to constitute doing business in the Philippines. In this
case, we find that respondent failed to prove that petitioner's activities in the
Philippines constitute doing business as would prevent it from bringing an action.
Title: STEELCASE, INC., PETITIONER, VS. DESIGN INTERNATIONAL SELECTIONS,
INC., RESPONDENT.
Citation: G.R. No. 171995, April 18, 2012

Facts: Steelcase, Inc. (Steelcase) granted Design International Selections, Inc.

(DISI) the right to market, sell, distribute, install, and service its products to end-
user customers within the Philippines.Steelcase argues that Section 3(d) of R.A.
No. 7042 or the Foreign Investments Act of 1991 (FIA) expressly states that the
phrase doing business excludes the appointment by a foreign corporation of a
local distributor domiciled in the Philippines which transacts business in its own
name and for its own account. On the other hand, DISI argues that it was
appointed by Steelcase as the latter’s exclusive distributor of Steelcase products.
The dealership agreement between Steelcase and DISI had been described by the
owner himself as basically a buy and sell arrangement.

Issue: Whether or not Steelcase had been doing business in the Philippines.

Ruling: NO.

[T]he appointment of a distributor in the Philippines is not sufficient to constitute

doing business unless it is under the full control of the foreign corporation. On the
other hand, if the distributor is an independent entity which buys and distributes
products, other than those of the foreign corporation, for its own name and its
own account, the latter cannot be considered to be doing business in the
Philippines. Here, DISI was an independent contractor which sold Steelcase
products in its own name and for its own account. As a result, Steelcase cannot be
considered to be doing business in the Philippines by its act of appointing a
distributor as it falls under one of the exceptions under R.A. No. 7042.