CORPORATION LAWExplain briefly the CONCESSION THEORY. Under this theory, a corporation is a creature without any existence until it has received the imprimatur of the state acting according to law. Can a private corporation bring a suit for libel or any other form of defamation and claim moral damages? YES. Article 2219(7) does not qualify whether the plaintiff is a natural or juridical person. Therefore, a juridical person such as a corporation can validly complain for libel or any other form of defamation and claim for moral damages. Moreover, where the broadcast is libelous per se, the law implies damages. In such a case, evidence of an honest mistake or the want of character or reputation of the party libeled goes only in mitigation of damages. (FILIPINAS BROADCASTING NETWORK, INC. vs. AGO MEDICAL AND EDUCATIONAL CENTER-BICOL CHRISTIAN COLLEGE OF MEDICINE, G.R. No. 141994, 17 January 2005) Explain briefly the DOCTRINE OF RELATION. Under this doctrine, when the delay in effecting or filing the amended articles of incorporation for the extension of corporate term is due to an insuperable interference occurring without the corporation’s intervention which could not have been prevented by prudence, diligence, and care, the same will be treated as having been effected before the expiration of the original term of the corporation. What shares could be deprived of voting rights? Section of the Corporation Code explicitly provides that “no share may be deprived of voting rights except those classified and issued as “preferred” or “redeemable” shares, unless otherwise provided in this Code”, and that “there shall always be a class or series of shares which have complete voting rights. There is nothing in the articles of incorporation or an iota of evidence on record that shows that class “B” shares were categorized as either preferred or redeemable shares. (CASTILLO, et. al. vs. ANGELES BALINGHASAY, et. al., GR No. 150976, 18 October 2004) Explain the DOCTRINE OF EQUALITY OF SHARES. Where the articles of incorporation do not provide any distinction of the shares of stock, all shares issued by a corporation are presumed to be equal and entitled to the same rights and privileges and subject to the same liabilities. The corporation has property of its own which consists chiefly of real estate. a mere instrumentality or adjunct of the other. INC. A subsidiary has an independent and separate juridical personality. and is but a conduit for its principal. FILIPINO BUSINESS CONSULTANTS. no separate mind. 12 August 2005) Where. In applying the doctrine. (SILVERIO. to perpetuate the violation of a statutory or other positive legal duty. Properties registered in the name of the corporation are owned by it as an entity separate and distinct from its members. Where one corporation is so organized and controlled and its affairs are conducted so that it is. It must be kept in mind that the control must be shown to have been exercised at the time the acts complained of took place. The control necessary to invoke the rule is not majority or even complete stock control but such domination of finances. vs. the fiction of the corporate entity of the ‘instrumentality’ may be disregarded. not merely majority or complete stock control. could the separate identities of the two corporations be disregarded in order to satisfy the labor claims of dismissed workers? YES. (2) such control must have been used by the defendant to commit fraud or wrong. It is evident that the transaction was made in order to remove the remaining assets of the first company from the reach of any judgment that may be rendered in the ULP cases filed against it.. While a corporation may be a subsidiary of another.. but its holder is not the owner of any part of the capital of the corporation. No. While shares of stock constitute personal property. the control and breach of duty must . in fact.R. (Jardine Davis. G. Nor is he entitled to the possession of any definite portion of its property or assets. 15 July 2005) Explain the Instrumentality Rule. or dishonest acts in contravention of plaintiff’s legal rights. JR. will or existence of its own. they do not represent property of the corporation. 151438. JRB Realty. The sale of franchise and certificates of public convenience as well as most of its bus units to a company owned by the daughter of one of the major stockholder of the corporation. distinct from that of its parent company. right in the middle of a labor dispute is highly suspicious. properties of the corporation were sold to another company owned by the daughter of a major stockholder of the former. vs. any claim or suit against the latter does not bind the former. at the height of a labor dispute. and vice versa.R. hence. or the right to share in its proceeds to that extent when distributed according to law and equity. and (3) the aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of. No. State the requisites that must be established for the legal existence of a subsidiary to be disregarded. it does not necessarily follow that its corporate legal existence can just be disregarded. Inc. A corporation is a juridical person distinct from the members composing it. policies and practices that the controlled corporation has.Would substantial ownership of the shares of a corporation make the stockholder the owner of its properties or entitle him to the possession of any definite portion of the corporate properties? NO. A share of stock only typifies an aliquot part of the corporation's property. G. The stockholder is not a co-owner or tenant in common of the corporate property. Moreover. so to speak. 143312. the following requisites must be established: (1) control. et al. where public convenience is defeated. It continues for other legitimate objectives. G. their orders are not reviewable by the courts.. et al. No. the stipulation in the ByLaws providing for the election of the Board of Directors by districts is a form of limitation on the voting rights of the members of a non-stock corporation as recognized under the aforesaid Section 89.. When that happens. where a wrong is sought to be justified thereby. Hnece. or where a separate corporate identity is used to evade financial obligations to employees or to third parties.R. et al. 128464. broadened or denied to the extent specified in the articles of incorporation or the by-laws. NLRC. G. 129552. circular or regulation requiring it.C. therefore. JAVIER & SONS. the notion of separate legal entity should be set aside and the factual truth upheld. The corporate mask may be removed and the corporate veil pierced when a corporation is the mere alter ego of another. is the corporate character necessarily abrogated? NO. Unless there is a law. (PAMPLONA PLANTATION COMPANY. 29 May 1996) When the corporate mask is removed.R. ET AL. 2004) . (LUIS AO-AS. 159121. 03 February 2005) Should debtors be formally notified for the change of corporate name to be valid and binding? The Court cannot impose on a bank that changes its corporate name to notify a debtor of such change absent any law. regulation or circular from the SEC or BSP requiring the formal notification of all debtors of banks of any change in corporate name. (Concept Builders vs. (P. applies only when the directors are elected by the members at large. (SABER vs. Section 89 of the Corporation Code pertaining to non-stock corporations provides that "(t)he right of the members of any class or classes (of a non-stock corporation) to vote may be limited. 108734. vs. August 31. 132981. vs. 29 June 2005) Could the corporation provide limitations on the voting rights of the members of a nonstock corporation? YES. No. discretionary on the bank. COURT OF APPEALS. COURT OF APPEALS.R. vs. Section 24 of the Code. ET AL. unless otherwise provided in this Code. 20 June 2006). Where badges of fraud exist. which requires the presence of a majority of the members entitled to vote in the election of the board of directors. et al. the corporate character is not necessarily abrogated.R. G. such as is always the case in stock corporations by virtue of Section 6. such notification remains to be a mere internal policy that banks may or may not adopt.proximately cause the injury or unjust loss for which the complaint is made. and so long as they act in good faith. No." This is an exception to Section 6 of the same code where it is provided that "no share may be deprived of voting rights except those classified and issued as preferred or redeemable shares. The formal notification is.. Such act would be judicial legislation. (G. G.R. Explain briefly the BUSINESS JUDGMENT RULE. COURT OF APPEALS. Questions of policy or of management are left solely to the honest decisions of officers and directors of a corporation. INC et al. No. INC. No. TINGHIL. He consents to the issuance of watered stocks or who. LINTONJUA JR. NO. (LAPU-LAPU FOUNDATION vs. by a specific provision of law. FELIPE SUZARA AND RAMON GARCIA. (REPUBLIC vs.R. 10 November 2004) . the corporation is bound thereby in favor of a person who deals with him in good faith in reliance on such apparent authority. ET AL.. or trustees personally liable for corporate acts? The instances are: when — 1. He is made. having knowledge thereof.. G. 156306 January 28. 160215. the final say will have to be with the board of directors through its officers and agents as authorized by a board resolution or by its by-laws. G. his actual authority but acts within the scope of an apparent authority with which the corporation has clothed him by holding him out or permitting him to appear as having such authority. resulting in damages to the corporation. 153535. the corporation will. or 4. or (c) for conflict of interest. G. directors. No. et al. to act within the scope of an apparent authority. 28 July 2005) Explain the DOCTRINE OF APPARENT AUTHORITY. would such authority carry with it the power to verify computation of such claims? YES. In what instances are officers. Although an officer or agent acts without. (HYDRO RESOURCES CONTRACTORS CORPORATION vs. or in excess of. does not forthwith file with the corporate secretary his written objection thereto. MINDANAO FERROALLOY CORPORATION. CA. 2005. 2. SOLIDBANK CORPORATION vs. 144805. The declarations of the agent alone are generally insufficient to establish the fact or extent of his/her authority (EDUARDO V. the NIA Administrator has been empowered to grant or deny foreign differential claims. NIA. No. 08 June 2006).R. He agrees to hold himself personally and solidarily liable with the corporation. in a contract. it holds him out to the public as possessing the power to do those acts. Even assuming for the sake of argument that the Administrator had no authority to bind NIA. 29 January 2004) If.. ETERNIT CORPORATION. When a corporation knowingly permits one of its officers. 3. No.R. Any sale of real property of a corporation by a person purporting to be an agent thereof but without written authority from the corporation is null and void. as against anyone who has in good faith dealt with it through such agent. et al. vs. G. It would be preposterous for the NIA Administrator to have the power of granting claims without the authority to verify the computation of such claims. INSTITUTE FOR SOCIAL CONCERN. or any other agent. and thus. the latter is already estopped after repeatedly representing that the Administrator had such authority. to personally answer for his corporate action. or (b) for bad faith or gross negligence in directing its affairs. be estopped from denying the agent’s authority.Under what conditions could a private corporation sell its real properties through an agent? While a corporation may appoint agents to negotiate for the sale of its real properties.R. A corporation may be estopped from denying as against third persons the authority of its officers or agents who have been clothed by it with ostensible or apparent authority. An unauthorized act of an officer of the corporation is not binding on it unless the latter ratifies the same expressly or impliedly by its board of directors. He assents (a) to a patently unlawful act of the corporation. its stockholders or other persons. HON. along with corporation. bad faith exists when a material deviation from the structural plan was made without the clients being consulted first especially where it appears that the act was done to lower the cost of construction. 26 May 2005) . CONSTRUCTION INDUSTRY AND ARBITRATION COMMISSION and SPS. on November 30. 2001. INC. 8792. 140667. 12 August 2004) Where an officer of a construction company revised and deviated from the structural plan of the building in order to reduce the costs without notice to or approval by the clients. 07 October 2004) Is teleconferencing now legally permissible? YES. the failure to submit a certified true copy of the board resolution authorizing an officer to represent the corporation is a sufficient ground for the dismissal thereof. ROXAS ELECTRIC AND CONSTRUCTION COMPANY. in light of Republic Act No. No. vs. G. No. Determine whether the authority to sell Lot 2 includes the authority to sell portion of Lot 1. COURT OF APPEALS. The Securities and Exchange Commission issued SEC Memorandum Circular No. Thus. the Board of Directors authorized its president to sell Lot 2. may so validly attach when he assents to a patently unlawful act of the corporation or for bad faith or gross negligence in directing its affairs. 30 July 2004) Could courts take judicial notice of board resolutions on a corporate officer’s authority to execute verification and certification against forum shopping? NO. the courts may take judicial notice that business transactions may be made by individuals through teleconferencing. et. As a general rule. teleconferencing and videoconferencing of members of board of directors of private corporations is a reality.R. 152392. the personal liability of a corporate director. No.R. a portion of Lot 1 will be sold to the buyer. The president agreed to give the buyer a right of way over Lot 1 and in case such right of way is insufficient.. vs.. INC. COURT OF APPEALS and KOREAN AIRLINES. NARCISO & AIDA QUIAMBAO. the officers of a corporation are not personally liable for their official acts unless it is shown that they have exceeded their authority. trustee or officer. INC. could personal liability for damages attach to such officer? YES.al. In the Philippines. at a price and under such terms and conditions which he deemed most reasonable and advantageous to the corporation. 159795. providing the guidelines to be complied with related to such conferences. Indeed. Neither may such authority be implied from the authority granted to sell Lot 2 “on such terms and conditions which he deems most reasonable and advantageous.In a resolution. vs. In this age of modern technology. The authority to sell Lot 2 did not include authority to sell portion of Lot 1.R. (SPOUSES DAVID and COORDINATED GROUP. Courts are not expected to take judicial notice of corporate board resolutions on corporate officer’s authority to represent a corporation.” (WOODCHILD HOLDINGS. G. However. (DEVELOPMENT BANK OF THE PHILIPPINES vs. 147217. G. 15. (EXPERTRAVEL & TOURS. GR No. INC. As specifically provided under Section 79 of the Corporation Code. the corporation may be considered a de facto corporation whose right to exist may not be inquired into in a collateral manner. exercises the right and the privilege of voting on them. would juridical existence automatically cease? NO. even if they are sequestered by the government through the PCGG. 276 SCRA 681) At the very least. (LOYOLA GRANVILLAS HOMEOWNERS ASSOCIATION vs. as a rule. vs INTEGRATED SILICON. thus necessitating the continued sequestration of the shares and authority to vote thereupon by the PCGG while the main issue is pending before the Sandiganbayan.. the registered owner of the shares of a corporation. to constitute “doing business”. the foreign company’s activities in the Philippines were confined to (1) maintaining a stock of goods solely for the purpose of having the same processed by another company. et al. The PCGG as a mere conservator cannot. 8 June 2005) In the Agreement. 09 June2006) Is the issuance of a certificate of merger by the SEC a condition precedent to the transfer of shares of the absorbed corporation to the surviving corporation? A merger does not become effective upon the mere agreement of the constituent corporations. CA.) vs. Under Section 1 of the Implementing Rules and Regulations of the Foreign Investment Act. only if it is able to establish that (1) there is prima facie evidence showing that the said shares are ill-gotten and thus belong to the State. (SAWADJAAN vs. SANDIGANBAYAN. (AGILENT TECHNOLOGIES SINGAPORE (PTE) LTD. The registered owner of sequestered shares may only be deprived of these voting rights. and (2) there is an imminent danger of dissipation. CA.In case the by-laws could not be filed within the prescribed period. Under what conditions could the PCGG vote sequestered shares? It is settled that as a general rule. the merger shall only be effective upon the issuance of a certificate of merger by the Securities and . No. G. no disposition of corporate funds to the prejudice of creditors is allowed. A corporation would not ipso facto lose its powers for failure to file the required bylaws. Hence. and (2) consignment of equipment with such company to be used in the processing of products for export. the capital stock. 172556. Under this doctrine. GR 154618. (TRANS MIDDLE EAST (PHILS. the activity to be undertaken in the Philippines is one that is for profit-making. the foregoing activities do not constitute doing business.R. By and large. Could such foreign corporation be considered doing business in the Philippines? NO. and the PCGG authorized to exercise the same. property and other assets of a corporation are regarded as equity in trust for the payment of the corporate debts. 14 April 2004) Explain the TRUST FUND DOCTRINE. exercise acts of dominion by voting these shares. et al. upon the effectivity of the merger.R. 31 August 2000. and in the progressive prosecution of. EUROPEAN RESOURCES AND TECHNOLOGIES. 14 April 2004) Do the powers of a resident agent include the authority to execute a certification against forum-shopping on behalf of the foreign company? NO. 26 July 2004) What are the general tests to determine whether a foreign corporation is doing business in the Philippines? Substance Test – whether the foreign corporation is continuing the body of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another. INGENIEUBURO BIRKHAHN. GR 131367.. 143866 & 143877. vs.R. et al. (HUTCHISON PORTS PHILIPPINES LIMITED vs SBMA. and contemplates. By operation of law. NATIONAL DEVELOPMENT CO. subject to its prior determination that the merger is not inconsistent with the Code or existing laws. 22 August 2005). such resident may not be aware of actions initiated by its principal. INC. the absorbed corporation ceases to exist but its rights. regardless of the volume of business. vs INTEGRATED SILICON. The issuance of the certificate of merger is crucial because not only does it bear out SEC's approval but also marks the moment whereupon the consequences of a merger take place. whether in the Philippines against a domestic corporation or private individual.. et al. (EXPERTRAVEL & . the purpose and object of its organization (AGILENT TECHNOLOGIES SINGAPORE (PTE) LTD. No. and properties as well as liabilities shall be taken and deemed transferred to and vested in the surviving corporation (POLIAND INDUSTRIAL LTD. to that extent. the Code particularly mandates that a favorable recommendation of the appropriate government agency should first be obtained. G. or in the country where such corporation was organized and registered. against a Philippine registered corporation or a Filipino citizen. Where a party to the merger is a special corporation governed by its own charter. Would participation in a bidding for the development and operation of a modern marine container terminal constitute doing business in the Philippines for which a license must be secured? Participating in the bidding process constitutes “doing business” because it shows the foreign corporation’s intention to engage in business here. G.Exchange Commission (SEC). The bidding for the concession contract is but an exercise of the corporation’s reason for its existence. vs. Continuity Test – continuity of commercial dealings and arrangements. xxx it is the performance by a foreign corporation of the acts for which it was created. 159586. GR 154618. the performance of acts or works or the exercise of some of the functions normally incident to.. Nos. This is because while a resident agent may be aware of actions filed against his principal (a foreign corporation doing business in the Philippines. being the one authorized to receive services and other legal processes on its behalf). that determines whether a foreign corporation needs a license or not. R. CHUBB & SONS. COURT OF APPEALS. PEOPLE OF THE PHILIPPINES. The complainant's capacity to sue in such case becomes immaterial. would it follow that its insurer. GR No.. No. 2005) 26 May Where the insured (a foreign corporation doing business without license) is incapacitated to sue before the Philippine courts. COURT OF APPEALS and KOREAN AIRLINES. likewise suffer such incapacity? NO. et al.AL. It is conferred by law and not by the parties. both charges to be filed and proceeded independently.TOURS. ET. (LORENZO SHIPPING vs. 140081. SASOT. A dispute involving the corporation and its stockholders is not necessarily an intra-corporate dispute cognizable only by the Securities and Exchange Commission. the avowed objective of which is to enable such management committee or rehabilitation receiver to effectively exercise its powers free from any judicial or extra-judicial interference that might unduly hinder or prevent the rescue of the distressed company. vs. in exercising its right of subrogation. vs. 8 June 2004) Could a foreign corporation not engaged and licensed to do business in the Philippines maintain a cause of action for unfair competition? YES. (PEOPLE vs. 04 March 2005) Discuss the effect/s of the creation of a management committee. a fraudulent act may give rise to liability for violation of the rules and regulations of the SEC cognizable by the SEC itself. 23 June 2005) . INC. vs. (TYSON’S SUPER CONCRETE. The appointment will result in suspension of all actions against the corporation. 152392.” The better policy in determining which body has jurisdiction over a case would be to consider not only the relationship of the parties but also the nature of the questions raised in the subject of the controversy. It is essentially an act against the State and it is the latter which principally stands as the injured party. No. such that. INC.R. FERNANDEZ and HAJIME UMEZAWA. G. as well as criminal liability for violation of the Revised Penal Code cognizable by the regular courts. et al. The crime of unfair competition punishable under Article 189 of the Revised Penal Code is a public crime.R. and may be simultaneously with the other. No.. Rights inherited by a subrogee pertain only to the obligations not to capacity. (MELBAROSE R. It should be obvious that not every conflict between a corporation and its stockholders involves corporate matters that only the SEC can resolve in the exercise of its adjudicatory or quasijudicial powers. 29 June 2005) Would a pending intra-corporate case against an officer preclude the filing of a criminal action against the said officer? The filing of the civil/intra-corporate case before the SEC (now RTC) does not preclude the simultaneous and concomitant filing of a criminal action before the regular courts. G. Incapacity of the insured will not affect the capacity of the insurer exercising its right of subrogation because capacity is personal to its holder. 149403. Nor does it ipso facto negate the jurisdiction of the Regional Trial Court over the subject cases. G. 143193. G.What could prevent the suspension of actions following the creation of a management committee or rehabilitation receiver? When proceedings have already been pending for almost ten years and have already reached the Supreme Court. AMPIL.R. its time and resources wasted by the proceedings that took place before the lower courts. G.R. (ABACUS SECURITIES CORPORATION vs. to cancel or otherwise liquidate a customer’s order. 2005) Explain the Mandatory Close Out Rule The rule vests upon a broker or dealer. not just the right. et al. 140081. the management committee has been unduly burdened enough.." is imperative and operates to impose a duty. No. (TYSON’S SUPER CONCRETE. 160016. COURT OF APPEALS. INC. which may be legally enforced. No. The greater interest of justice demands that the issues raised in the present petition should be disposed of. to order the annulment of the previous proceedings in the lower courts will only result in further delay. June 23. The word "shall" as opposed to the word "may. the obligation. if payment is not received within three days from the date of purchase. et al. Hence. 27 February 2006) .. vs.