HOME INSURANCE COMPANY v s . E A S T E R N S H I P P I N G G. R. L-34382, July 20, 1983 FACTS: On or about January 13, 1967, S. Kajikita & Co.

on board the SS Eastern Jupiter, which is owned by the respondent, from Osaka, Japan coils of Black Hot Rolled Copper Wires Rods. The shipment was covered by Bill of Lading with arrival notice to the Phelps Dodge Copper Products Corporation, the consignee. It was also insured with the plaintiff against all risks in the amount of P1,580,105.06. The coils discharged from the vessel were in bad order, consisting of loose and partly cut coils which had to be considered scrap. The plaintiff paid the consignee under insurance the amount of P3,260.44 for the loss/damage suffered by the cargo. Plaintiff, a foreign insurance company duly authorized to do business in the Philippines, made demands for payment of the aforesaid amount against the carrier and transportation company for reimbursement of the aforesaid amount, but each refused to pay the same. The Eastern Shipping Lines filed its answer and denied the allegations of Paragraph I which refer to the plaintiffs capacity to sue for lack of knowledge or information sufficient to form a belief as to the truth thereof. Angel Jose Transportation, on the other hand, admitted the jurisdictional averments in paragraphs 1, 2 and 3 of the heading parties. The Court of First Instance dismissed the complaint on the ground that the appellant had failed to prove its capacity to sue. The petitioner then filed a petition for review on certiorari. ISSUE: Whether or not that the trial court erred in dismissing the finding that plaintiff-appellant has no capacity to sue? RULING: The court held that the objective of the law is to subject the foreign corporation to the jurisdiction of our court. The Corporation Law must be given reasonable, not an unduly harsh interpretation which does not hamper the development of trade relations and which fosters friendly commercial intercourse among countries. Counsel for appellant contends that at the time of the service of summons, the appellant had not yet been authorized to do business. But, the lack of capacity at the time of the execution of the contracts was cured by the subsequent registration is also strengthened by the procedural aspects of the case. The court find the general denials inadequate to attack the foreign corporations lack of capacity to sue in the light of its positive averment that it is authorized to do so. Section 4, Rule 8 requires that "a party desiring to raise an issue as to the legal existence of any party or the capacity of any party to sue or be sued in a representative capacity shall do so by specific denial, which shall include such supporting particulars as are particularly within the pleader's knowledge. At the very least, the private respondents should have stated particulars in their answers upon which a specific denial of the petitioner's capacity to sue could have been based or which could have supported its denial for lack of knowledge. And yet, even if the plaintiff's lack of capacity to sue was not properly raised as an issue by the answers, the petitioner introduced documentary evidence that it had the authority to engage in the insurance business at the time it filed the complaints. The Supreme Court granted the petition, reversing the decision of the lower court.

HARDEN v BENGUET CONSOLIDATED MINING COMPANY G.R. No. L-37331, March 18, 1933 FACTS: Benguet Consolidated Mining Co. was organized in June, 1903, as a sociedad anonima in conformity with the provisions of Spanish law. Balatoc Mining Co. was organized in December 1925, as a corporation, in conformity with the provisions of the Corporation Law (Act No. 1459). Both were organized for mining of gold and their respective properties are located only a few miles apart in Benguet. Balatoc capital stock consists of one million shares of the par value of one peso (P1) each. When the Balatoc was first organized, its properties were largely undeveloped. To improve its operations, the companys committee approached A. W. Beam, then president and general manager of the Benguet Company, to secure the capital necessary to the development of the Balatoc property. A contract was entered into wherein Benguet will (1) construct a milling plant for the Balatoc mine, of a capacity of 100 tons of ore per day, and with an extraction of at least 85 per cent of the gold content; (2) erect an appropriate power plant. In return, Benguet will receive from Balatoc shares of a par value of P600,000. The total cost incurred by Benguet in developing Balatoc was P1,417,952.15. A certificate for 600,000 shares of the stock of the Balatoc Company was given to Benguet and the excess value was paid to Benguet by Balatoc in cash. Due to the improvements made by Benguet, the value of shares of Balatoc increased in the market (from P1 to more than P11) and dividends enriched its stockholders. Harden, the owner of thousands of shares of Balatoc, questioned the transfer of 600,000 shares to Benguet with the success of the development. ISSUES: Is it unlawful for Benguet Company to hold any interest in a mining corporation. W/N, assuming the first question to be answered in the affirmative, the Benguet Company, which was organized as a sociedad anonima, is a corporation within the meaning of the language used by the Congress of the United States, and later by the Philippine Legislature, prohibiting a mining corporation from becoming interested in another mining corporation. RULING: 1st Issue: NO. The defendant Benguet Company has committed no civil wrong against the plaintiffs, and if a public wrong has been committed, the directors of the Balatoc Company, and the plaintiff Harden himself, were the active inducers of the commission of that wrong. The contract, supposing it to have been unlawful in fact, has been performed on both sides. 2nd Issue: Having shown that the plaintiffs in this case have no right of action against the Benguet Company for the infraction of law supposed to have been committed, we forego any discussion of the further question whether a sociedad anonima created under Spanish law, such as the Benguet Company,

1. 2.

is a corporation within the meaning of the prohibitory provision already so many times mentioned. A sociedad anonima is something very much like the English joint stock company, with features resembling those of both the partnership is shown in the fact that sociedad, the generic component of its name in Spanish, is the same word that is used in that language to designate other forms of partnership, and in its organization it is constructed along the same general lines as the ordinary partnership. In section 75 of the Corporation Law, a provision is found making the sociedad anonima subject to the provisions of the Corporation Law "so far as such provisions may be applicable", and giving to the sociedades anonimas previously created in the Islands the option to continue business as such or to reform and organize under the provisions of the Corporation Law. The provision in Section 75 of the Act Congress of July 1, 1902 (Philippine Bill), generally prohibiting corporations engaged in mining and members of such from being interested in any other corporation engaged in mining, was amended by section 7 of Act No. 3518 of the Philippine Legislature, approved by Congress March 1, 1929. The change in the law effected by this amendment was in the direction of liberalization. Thus, the inhibition contained in the original provision against members of a corporation engaged in agriculture or mining from being interested in other corporations engaged in agriculture or in mining was so modified as merely to prohibit any such member from holding more than fifteen per centum of the outstanding capital stock of another such corporation. Moreover, the explicit prohibition against the holding by any corporation (except for irrigation) of an interest in any other corporation engaged in agriculture or in mining was so modified as to limit the restriction to corporations organized for the purpose of engaging in agriculture or in mining.

ASTRAQUILLO, vs. REPUBLIC OF THE PHILIPPINES, G.R. No. L-4818, February 28, 1955 1. CORPORATION LAW; SHARES OF STOCK, NATURE AND TRANSFER OF; EFFECT OF UNREGISTERED TRANSFER. Shares of stock are personal property and may be transferred by endorsement of the corresponding stock certificate, coupled with its delivery. However, the transfer shall not be valid, except as between the parties, until it is entered and noted upon the books of the corporation. (Section 35, Corporation Law). QUASI-NEGOTIABILITY AND NON-NEGOTIABILITY OF SHARES OF STOCK. Although shares of stock are sometimes regarded as quasi-negotiable, in the sense that they may be transferred endorsement, coupled with delivery, they are non-negotiable, because the holder thereof takes them without prejudice to such rights or defenses as the registered owner or creditor may have under the law, except insofar as such rights or defenses are subject to the limitations imposed by the principles governing estoppel. STOCKHOLDERS; RIGHTS OF REGISTERED STOCKHOLDERS SUPERIOR TO THAT OF PURCHASER ON NOTICE OF FACTS INDICATING NEED OF INQUIRING INTO REGULARLY OF SALES. Where the plaintiffs were, at the time of the alleged sales in their favor of the shares stock in question, aware of sufficient facts to put them on notice of the need of inquiring into the regularity of the transactions and the title of the opposed vendors, they can not validly claim, against the registered stockholder, the statue of purchasers in good faith. PRINCIPAL OF REGISTERED OWNER ENJOYS SAME RIGHTS OF REGISTERED STOCKHOLDER. The principal or beneficiary of the registered owner of shares of stock is entitled to invoke such rights as the registered stockholders may have under the law. FACTS: This action involves the title to 1,600,000 shares of stock of the Lepanto Consolidated Mining Co., Inc. Plaintiffs contend that De los Santos bought 55,000 shares from Juan Campos, in Manila, early in December, 1942; that he bought 300,000 shares from Carl Hess; and that, before Christmas of 1942, he bought 800,000 shares from Carl Hess, this time for the account and benefit of Astraquillo. By virtue of vesting P-12, dated February 18, 1945, title to the 1,600,000 shares of stock in dispute was, however, vested in the Alien Property Custodian of the U. S. (hereinafter referred to as the Property Custodian) as Japanese property. Hence, plaintiffs filed their respective claims with the Property Custodian. In due course, the Vested Property Claims Committee of the Philippine Alien Property Administration made a "determination," dated March 9, 1948, allowing said claims, which were considered and heard jointly as Claim No. 535, but, upon personal review, the Philippine Alien Property Administration made by said Committee and decreed that "title to the shares in question shall remain in the name of the Philippine Alien Property Administrator." Consequently, plaintiffs instituted the present action to establish title to the aforementioned shares of stock and pray that judgment be rendered declaring them lawful owners of said shares of stock, with such dividends, profits and rights as may have accrued thereto; requiring the defendant to render accounts and to transfer said shares of stock to plaintiffs' names; and sentencing the former to pay the costs. The defendant herein, Attorney General of the U. S., successor to the "Administrator", contends that prior to the outbreak of the war in the Pacific, said shares of stock were bought by Vicente Madrigal, in trust for, and for the benefit of, the Mitsui Bussan Kaisha (hereinafter referred to as the "Mitsuis"), a corporation organized in accordance with the laws of Japan, the true owner thereof, with branch office in the Philippines; that on or before March, 1942, Madrigal delivered the corresponding stock certificates, with his blank

2.

3.

4.

indorsement thereon, to the Mitsuis, which kept said certificates, in the files of its office in Manila, until the liberation of the latter by the American forces early in 1945; that the Mitsuis had never sold, or otherwise disposed of, said shares of stock; and that the stock certificates aforementioned must have been stolen or looted, therefore, during the emergency resulting from said liberation. Judgment was rendered in favor of the plaintiffs Issue: Held: NO It appears from the evidence presented that the only evidence on the alleged sale of the shares of stock in question to the plaintiffs the main issue in the case at bar is the testimony of Apolinario de los Santos, who now claims to be the sole owner thereof. Thus, the issue is based, and must stand or fall, therefore, upon the uncorroborated testimony of plaintiff Apolinario de los Santos, and the credence and weight that may be given thereto. Upon a review of the record, we find, however, that said testimony is highly improbable and inherently weak. The status of quasi-negotiability generally accorded to, and at present enjoyed by, certificates of stock, under the Philippine law, is in itself a recognition of the fact that the certificates are non-negotiable. Instead of sustaining appellees' claim, section 5 of the uniform Stock Transfer Act, which "gives full negotiability to certificates of stock," refutes said claim and confirms the non-negotiable character of stock certificates in the absence of said Unifrom Act, for, obviously, the same could not have given, negotiability to an instrument already possessing this attribute prior thereto. Again, apart from being distinct from the general Corporation Law, the aforementioned Uniform Act is not in force in the Philippines. In this connection, it should be noted that this special piece of legislation was adopted in some states of the union as early as the year 1910. The failure of the Philippine government to incorporate its provisions in our statute books, for a period of almost 45 years, is, to our mind, clear proof of the unwillingness of our department to change the policy set forth in section 35 of Act No. 1459. Needless to say, this fact negates our authority which is limited to the interpretation of the law, and its application, with all its imperfections to abandon what the dissenting opinion characterizes as the "civil law standpoint," and substitute, in lieu thereof, the commercial viewpoint, by applying said section 5 of the Uniform Stock Transfer Act, although not a part of the law of the land. Indeed, even in matters generally considered as falling within "commercial territory", the Roman Law concept has not given way in the Philippines to the Common Law approach, except when there is explicit statutory provision to the contrary. Whether plaintiffs had purchased the shares of stock in question?

CREBA vs. ROMULO G.R. No. 160756 March 9, 2010 Facts: Petitioner Chamber of Real Estate and Builders Associations, Inc. is an association of real estate developers and builders in the Philippines. It assails the validity of the imposition of minimum corporate income tax (MCIT) on corporations and creditable withholding tax (CWT) on sales of real properties classified as ordinary assets. Petitioner also asserts that the enumerated provisions of the subject revenue regulations violate the due process clause because, like the MCIT, the government collects income tax even when the net income has not yet been determined. They contravene the equal protection clause as well because the CWT is being levied upon real estate enterprises but not on other business enterprises, more particularly those in the manufacturing sector. Issue: Whether or not the imposition of the MCIT on domestic corporations is unconstitutional? Held: No. The MCIT on domestic corporations is a new concept introduced by RA 8424 to the Philippine taxation system. It came about as a result of the perceived inadequacy of the selfassessment system in capturing the true income of corporations. It was devised as a relatively simple and effective revenue-raising instrument compared to the normal income tax which is more difficult to control and enforce. It is a means to ensure that everyone will make some minimum contribution to the support of the public sector. Domestic corporations owe their corporate existence and their privilege to do business to the government. They also benefit from the efforts of the government to improve the financial market and to ensure a favorable business climate. It is therefore fair for the government to require them to make a reasonable contribution to the public expenses. Congress intended to put a stop to the practice of corporations which, while having large turn-overs, report minimal or negative net income resulting in minimal or zero income taxes year in and year out, through under-declaration of income or over-deduction of expenses otherwise called tax shelters. The primary purpose of any legitimate business is to earn a profit. Continued and repeated losses after operations of a corporation or consistent reports of minimal net income render its financial statements and its tax payments suspect. For sure, certain tax avoidance schemes resorted to by corporations are allowed in our jurisdiction. The MCIT serves to put a cap on such tax shelters. As a tax on gross income, it prevents tax evasion and minimizes tax avoidance schemes achieved through sophisticated and artful manipulations of deductions and other stratagems. Since the tax base was broader, the tax rate was lowered. To further emphasize the corrective nature of the MCIT, the following safeguards were incorporated into the law: First, recognizing the birth pangs of businesses and the reality of the need to recoup initial major capital expenditures, the imposition of the MCIT commences only on the fourth taxable year immediately following the year in which the corporation commenced its operations. This grace period allows a new business to stabilize first and make its ventures viable before it is subjected to the MCIT. Second, the law allows the carrying forward of any excess of the MCIT paid over the normal income tax which shall be credited against the normal income tax for the three immediately succeeding years. Third, since certain businesses may be incurring genuine repeated losses, the law authorizes the Secretary of Finance to suspend the imposition of MCIT if a corporation suffers losses due to prolonged labor dispute, force majeure and legitimate business reverses. Conclusion The renowned genius Albert Einstein was once quoted as saying "[the] hardest thing in the world to understand is the income tax." When a party questions the constitutionality of an income tax measure, it has to contend not only with Einsteins observation but also with the vast and well-established jurisprudence in support of the plenary powers of Congress to impose taxes. Petitioner has miserably failed to discharge its burden of convincing the Court that the imposition of MCIT and CWT is unconstitutional.

Bibiano Reynoso IV vs Court of Appeals 345 SCRA 335 Business Organization Corporation Law Piercing the Veil of Corporate Fiction Facts: Reynoso was the branch manager of Commercial Credit Corporation Quezon City (CCC-QC), a branch of Commercial Credit Corporation (CCC). It was alleged that Reynoso was opposed to certain questionable commercial practices being facilitated by CCC which caused its branches, like CCC-QC, to rack up debts. Eventually, Reynoso withdrew his own funds from CCC-QC. This prompted CCC-QC to file criminal cases for estafa and qualified theft against Reynoso. The criminal cases were dismissed and Reynoso was exonerated and at the same time CCC-QC was ordered to pay Reynosos counterclaims which amounted to millions. A writ of execution was issued against CCC-QC. The writ was opposed by CCC-QC as it now claims that it has already closed and that its assets were taken over by the mother company, CCC. Meanwhile, CCC changed its name to General Credit Corporation (GCC). Reynoso then filed a petition for an alias writ of execution. GCC opposed the writ as it argued that it is a separate and distinct corporation from CCC and CCC-QC, in short, it raises the defense of corporate fiction. ISSUE: HELD: No. The veil of corporate fiction must be pierced. It is obvious that CCCs change of name to GCC was made in order to avoid liability. CCC -QC willingly closed down and transferred its assets to CCC and thereafter changed its name to GCC in order to avoid its responsibilities from its creditors. GCC and CCC are one and the same; they are engaged in the same line of business and single transaction process, i.e. finance and investment. When the mother corporation and its subsidiary cease to act in good faith and honest business judgment, when the corporate device is used by the parent to avoid its liability for legitimate obligations of the subsidiary, and when the corporate fiction is used to perpetrate fraud or promote injustice, the law steps in to remedy the problem. When that happens, the corporate character is not necessarily abrogated. It continues for legitimate objectives. However, it is pierced in order to remedy injustice, such as that inflicted in this case. Whether or not GCC is correct?

Renato Tayag vs Benguet Consolidated, Inc. 26 SCRA 242 Business Organization Corporation Law Domicile of a Corporation By Laws Must Yield To a Court Order Corporation is an Artificial Being Facts: In March 1960, Idonah Perkins died in New York. She left behind properties here and abroad. One property she left behind were two stock certificates covering 33,002 shares of stocks of the Benguet Consolidated, Inc (BCI). Said stock certificates were in the possession of the Country Trust Company of New York (CTC-NY). CTC-NY was the domiciliary administrator of the estate of Perkins in the USA. Meanwhile, in 1963, Renato Tayag was appointed as the ancillary administrator of the properties of Perkins she left behind in the Philippines. A dispute arose between CTC-NY and Tayag as to who between them is entitled to possess the stock certificates. A case ensued and eventually, the trial court ordered CTCNY to turn over the stock certificates to Tayag. CTC-NY refused. Tayag then filed with the court a petition to have said stock certificates be declared lost and to compel BCI to issue new stock certificates in replacement thereof. The trial court granted Tayags petition. BCI assailed said order as it averred that it cannot possibly issue new stock certificates because the two stock certificates declared lost are not actually lost; that the trial court as well Tayag acknowledged that the stock certificates exists and that they are with CTC-NY; that according to BCIs by laws, it can only issue new stock certificates, in lieu of lost, stolen, or destroyed certificates of stocks, only after court of law has issued a final and executory order as to who really owns a certificate of stock. ISSUE: HELD: No. Benguet Consolidated is a corporation who owes its existence to Philippine laws. It has been given rights and privileges under the law. Corollary, it also has obligations under the law and one of those is to follow valid legal court orders. It is not immune from judicial control because it is domiciled here in the Philippines. BCI is a Philippine corporation owing full allegiance and subject to the unrestricted jurisdiction of local courts. Its shares of stock cannot therefore be considered in any wise as immune from lawful court orders. Further, to allow BCIs opposition is to render the court order against CTC-NY a mere scrap of paper. It will leave Tayag without any remedy simply because CTC-NY, a foreign entity refuses to comply with a valid court order. The final recourse then is for our local courts to create a legal fiction such that the stock certificates in issue be declared lost even though in reality they exist in the hands of CTC-NY. This is valid. As held time and again, fictions which the law may rely upon in the pursuit of legitimate ends have played an important part in its development. Further still, the argument invoked by BCI that it can only issue new stock certificates in accordance with its bylaws is misplaced. It is worth noting that CTC-NY did not appeal the order of the court it simply refused to turn over the stock certificates hence ownership can be said to have been settled in favor of estate of Perkins here. Also, assuming that there really is a conflict between BCIs bylaws and the cour t order, what should prevail is the lawful court order. It would be highly irregular if court orders would yield to the bylaws of a corporation. Again, a corporation is not immune from judicial orders. Whether or not the arguments of Benguet Consolidated, Inc. are correct?

International Express Travel & Tour Services, Inc. vs Court of Appeals 343 SCRA 674 Business Organization Corporation Law Corporation by Estoppel When Applied Facts: In 1989, International Express Travel & Tour Services, Inc. (IETTI), offered to the Philippine Football Federation (PFF) its travel services for the South East Asian Games. PFF, through Henri Kahn, its president, agreed. IETTI then delivered the plane tickets to PFF, PFF in turn made a down payment. However, PFF was not able to complete the full payment in subsequent installments despite repeated demands from IETTI. IETTI then sued PFF and Kahn was impleaded as a co-defendant. Kahn averred that he should not be impleaded because he merely acted as an agent of PFF which he averred is a corporation with separate and distinct personality from him. The trial court ruled against Kahn and held him personally liable for the said obligation (PFF was declared in default for failing to file an answer). The trial court ruled that Kahn failed to prove that PFF is a corporation. The Court of Appeals however reversed the decision of the trial court. The Court of Appeals took judicial notice of the existence of PFF as a national sports association; that as such, PFF is empowered to enter into contracts through its agents; that PFF is therefore liable for the contract entered into by its agent Kahn. The CA further ruled that IETTI is in estoppel; that it cannot now deny the corporate existence of PFF because it had contracted and dealt with PFF in such a manner as to recognize and in effect admit its existence. ISSUE: HELD: No. PFF, upon its creation, is not automatically considered a national sports association. It must first be recognized and accredited by the Philippine Amateur Athletic Federation and the Department of Youth and Sports Development. This fact was never substantiated by Kahn. As such, PFF is considered as an unincorporated sports association. And under the law, any person acting or purporting to act on behalf of a corporation which has no valid existence assumes such privileges and becomes personally liable for contract entered into or for other acts performed as such agent. Kahn is therefore personally liable for the contract entered into by PFF with IETTI. There is also no merit on the finding of the CA that IETTI is in estoppel. The application of the doctrine of corporation by estoppel applies to a third party only when he tries to escape liability on a contract from which he has benefited on the irrelevant ground of defective incorporation. In the case at bar, IETTI is not trying to escape liability from the contract but rather is the one claiming from the contract. Whether or not the Court of Appeals is correct?

G. C. ARNOLD vs. WILLITS & PATTERSON, LTD 44 Phil 634 (1923) FACTS: Arnold and Willits and Patterson, Ltd. entered into a contract by which plaintiff was appointed agent for a period of 5 years. A dispute arose as to the amount which plaintiff should receive for his services. Patterson retired and Willits became the sole owner of the assets of the firm. Willits then organized a corporation. He became exclusive owner except for a few stocks (nominal shares to qualify the directors) for organizational purposes. Another instrument was executed between Arnold and Willits. Such defined and specified the compensation of Arnold. Nothing shows that such was formally ratified or approved by the corporation. A statement of the corporation's account showed that there was due and owing the plaintiff a sum of money. The corporation's creditor's committee protested against such amount. Arnold filed suit to collect. Willits argued that the document was signed without the authority of the defendant corporation and also filed a counterclaim. ISSUE: Whether plaintiff may collect from defendant corporation.

HELD: Yes. The proposition that a corporation has an existence separate and distinct from its membership has its limitations. It must be noted that this separate existence is for particular purposes. It must also be remembered that there can be no corporate existence without persons to compose it; there can be no association without associates. This separate existence is to a certain extent a legal fiction. Whenever necessary for the interests of the public or for the protection or enforcement of the rights of the membership, courts will disregard this legal fiction and operate upon both the corporation and the persons composing it. He continued his employment and rendered his services after the corporation was organized and the second document was signed just the same as he did before, and both corporations recognized and accepted his services. It was a one man corporation, and Willits, as the owner of all of the stock, was the force and dominant power which controlled them. After the document was signed it was recognized by Willits that the plaintiff's services were to be performed and measured by its term and provisions, and there never was any dispute between plaintiff and Willits upon that question. Statements of account were made and prepared by the accountant on the assumption that the document was in full force and effect as between the plaintiff and the defendant. Previous financial statements show upon their face that the account of plaintiff was credited with several small items on the same basis, and it was not until the 23d of March, 1921, that any objection was ever made by anyone.

Arnold vs. Willits and Patterson Facts: In 1916, the Firm Willits & Patterson in San Francisco entered into a contract with Arnold whereby Arnold was to be employed for a period of five years as the agent of the firm here in the PI to operate an oil mill for which he was to receive a minimum salary of $200/mth, a 1% brokerage fee from all purchases and sales of merchandise, and half of the profits of the oil business and other businesses. provided if the business was at a loss, Arnold would receive $400/mth. Later, Patterson retired and Willits acquired all interests of the business. Willits organized a new Corp in San Francisco which took over and acquired all assets of the Firm Willits & Patterson. Willits was the owner of all the capital stock. New corp had the same name. After, Willits, organized a new Corporation here in the PI to take over all the business and assets of the firm here in the PI. Willits was the owner of all the capital stock. Later, there was dispute with regard to the construction of the contract as a result, a new contract in the form of a letter was entered into. Willits signed this. The statements of account showed that 106K was due and owing to Arnold. W&P Corp was in financial trouble and all assets were turned over to a creditors committee. In 1922, Arnold filed this complaint to recover 106K from W&P. W&P argues that the 2nd contract was signed without authority. And as counterclaim alleged that Arnold took 30K from the Corp but only 19.1K was due to him thus he owed 10.1K to W&P. CFI ordered Arnold to return the 10.1K. Issue: Is the CFI correct?

Held: No. The SC reverses. Arnold entitled to 68K plus half of 75K, representing PNs. Both Corps organized by Willits were a One Man Corporation. After the 2nd contract was signed it was recognized by Willits that Arnolds services were to be performed by its terms and there never was any dispute between Arnold and Willits. Although a new corp was created, the new corp dealt with and treated Arnold as its agent in the same manner as the previous corp had, thus the new corp is bound by the contract which the old firm made. In fact, the 2nd contract protected Willits from a larger claim, which the accountant said, would be over 160K. Where a stock of a corporation is owned by one person whereby the corp functions only for the benefit of such individual owner, the corp and the individual should be deemed to be the same. Thus the corp is bound by the contract.

Philippine Stock Exchange vs Court of Appeals 287 SCRA 232 Business Organization Corporation Law Extent of Power of the Securities and Exchange Commission Facts: Puerto Azul Land, Inc. (PALI) is a corporation engaged in the real estate business. PALI was granted permission by the Securities and Exchange Commission (SEC) to sell its shares to the public in order for PALI to develop its properties. PALI then asked the Philippine Stock Exchange (PSE) to list PALIs stocks/shares to facilitate exchange. The PSE Board of Governors denied PALIs application on the ground that there were multiple claims on the assets of PALI. Apparently, the Marcoses, Rebecco Panlilio (trustee of the Marcoses), and some other corporations were claiming assets if not ownership over PALI. PALI then wrote a letter to the SEC asking the latter to review PSEs decision. The SEC reversed PSEs decisions and ordered the latter to cause the listing of PALI shares in the Exchange. ISSUE: Whether or not it is within the power of the SEC to reverse actions done by the PSE? HELD: Yes. The SEC has both jurisdiction and authority to look into the decision of PSE pursuant to the Revised Securities Act and for the purpose of ensuring fair administration of the exchange. PSE, as a corporation itself and as a stock exchange is subject to SECs jurisdiction, regulation, and control. In order to insure fair dealing of securities and a fair administration of exchanges in the PSE, the SEC has the authority to look into the rulings issued by the PSE. The SEC is the entity with the primary say as to whether or not securities, including shares of stock of a corporation, may be traded or not in the stock exchange. HOWEVER, in the case at bar, the Supreme Court emphasized that the SEC may only reverse decisions issued by the PSE if such are tainted with bad faith. In this case, there was no showing that PSE acted with bad faith when it denied the application of PALI. Based on the multiple adverse claims against the assets of PALI, PSE deemed that granting PALIs application will only be contrary to the best interest of the general public. It was reasonable for the PSE to exercise its judgment in the manner it deems appropriate for its business identity, as long as no rights are trampled upon, and public welfare is safeguarded.

NATIONAL DEVELOPMENT COMPANY AND NEW AGRIX, INC. vs. PHILIPPINE VETERANS BANK 192 SCRA 257 FACTS: PD 1717 - ordered the rehabilitation of the Agrix Group of Companies to be administered mainly by the National Development Company. Agrix companies had a Claims Committee to process claims. Sec. 4(1) thereof providing that "all mortgages and other liens presently attaching to any of the assets of the dissolved corporations are hereby extinguished." Agrix Marketing (AGRIX) executed in favor of Phil. Veterans Bank REM on July 7,1978 over 3 parcels of land in LB, Laguna. AGRIX went bankrupt then Pres. Marcos issued PD 1717 to salvage the company. PVB filed claim with the Claims Comittee In the meantime, the New Agrix, Inc. and the National Development Company, petitioners herein, invoking Sec. 4 (1) of the decree, filed a petition with the Regional Trial Court of Calamba, Laguna, for the cancellation of the mortgage lien in favor of the private respondent. For its part, the private respondent took steps to extra judicially foreclose the mortgage, prompting the petitioners to file a second case with the same court to stop the foreclosure. The two cases were consolidated. Judge Francisco Ma. Guerrero annulled not only the challenged provision, viz., Sec. 4 (1), but the entire Pres. Decree No. 1717 on the grounds that: (1)the presidential exercise of legislative power was a violation of the principle of separation of powers; (2) the law impaired the obligation of contracts; and (3) the decree violated the equal protection clause. The motion for reconsideration of this decision having been denied, the present petition was filed. NDC and AGRIX says: PVB estopped since they filed claims in Claims Committee(cited another case Mendoza vs Agrix) ISSUE: WON New Agrix, Inc was validly constituted NO new corporation, being neither owned nor controlled by the Government, should have been created only by general and not special law. RATIO: The Court is especially disturbed by Section 4(1) of the decree extinguishing all mortgages and other liens attaching to the assets of AGRIX. It also notes, with equal concern, the restriction in Subsection (ii) thereof that all "unsecured obligations shall not bear interest" and in Subsection (iii) that "all accrued interests, penalties or charges as of date hereof pertaining to the obligations, whether secured or unsecured, shall not be recognized." On constitutionality of PD (Bill of Rights) "no person shall be deprived of life, liberty or property without due course of law nor shall any person be denied the equal protection of the law" Sec 10 "no law impairing the obligation of contracts shall be passed."Defense: Property rights subject to regulation under Police Power for the promotion of common welfare Court says: The police power is not a panacea for all constitutional maladies. Neither does its mere invocation conjure an instant and automatic

justification for every act of the government depriving a person of his life, liberty or property. A legislative act based on the police power requires the concurrence of a lawful subject anda lawful method. In more familiar words, a) the interests of the public generally, as distinguished from those of a particular class, should justify the interference of the state; and b) the means employed are reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals. Public interest not identited and link to welfare of greater number not established. Decree was issued to favour only special group of investors. Assuming there is valid public interest, method is oppressive since there was no consideration pain on the extinction of mortgage rights. There was arbitrary taking of property (Mortgage lien -property right) The decree operated, to use the words of a celebrated case, "with an evil eye and an uneven hand." AGRIX was singled out for government help, among other corporations where the stockholders or investors were also swindled. The Decree impairs the obligation of the contract between AGRIX and the private respondent without justification. On creation of New Agrix New Agrix, Inc. was created by special decree notwithstanding the provision of Article XIV,Section 4 of the 1973 Constitution, then in force, that: SEC. 4. The Batasang Pambansa shall not, except by general law, provide for the formation, organization, or regulation of private corporations, unless such corporations are owned or controlled by the Government or any subdivision or instrumentality thereof. The new corporation is neither owned nor controlled by the government. The National Development Corporation was merely required to extend a loan of not more thanP10,000,000.00 to New Agrix, Inc. Pending payment thereof, NDC would undertake the management of the corporation, but with the obligation of making periodic reports to the Agrix board of directors. After payment of the loan, the said board can then appoint its own management. The stocks of the new corporation are to be issued to the old investors and stockholders of AGRIX upon proof of their claims against the abolished corporation. They shall then be the owners of the new corporation. New Agrix, Inc. is entirely private and so should have been organized under the Corporation Law in accordance with the above-cited constitutional provision. On estoppel Philippine Veterans Bank not estopped. Filed with Claims Committee during Marcos time when Pres Marcos was absolute ruler and nobody questions him. Futile. No PD issued by Marcos that time was declared unconstitutional Mendoza case was not the same, since Mendoza received settlement of stocks P40,000.Here PVB did not receive single centavo