SEVILLA, CHOLO

S.Y. 2013-2014. SAN BEDA COLLEGE, ALABANG

BUSORG2 ATTY. BUSMENTE

DOCTRINES:
SET 9 STOCKS and STOCKHOLDERS
Nava v. Peers
(1) A stock subscription is a subsisting liability from the time the subscription is
made. The subscriber is as much bound to pay his subscription as he would be
to pay any other debt. The right of the corporation to demand payment is no less
incontestable.
(2) There is no cause of action for mandamus to compel the corporation to register
the transfer if the corporation has an unpaid claim on the share and no certificate
has been issued. The transfer is effective only between the parties.
Lim Tay v. Court of Appeals
(1) The registration of shares in a stockholder's name, the issuance of stock
certificates, and the right to receive dividends which pertain to the said shares
are all rights that flow from ownership. The determination of whether or not a
shareholder is entitled to exercise the above-mentioned rights falls within the
jurisdiction of the SEC. However, if ownership of the shares is not clearly
established and is still unresolved at the time the action for mandamus is filed,
then jurisdiction lies with the regular courts.
The Rural Bank of Lipa City, Inc. v. Court of Appeals
(1) For a valid transfer of shares of stock, the following must be strictly complied
with: (a) delivery of the certificate; (b) endorsement by the owner or his agent; (c)
to be valid to third parties, the transfer must be recorded in the books of the
corporation.
Ponce v. Alsons Cement Corporation
(1) If certificates were never issued by the corporation, the transferee cannot
demand for the issuance of the certificate of stock in his name.
(2) A transfer of shares of stock not recorded in the Stock and Transfer Book of the
corporation is non-existent as far as the corporation is concerned. Without such
recording, the transferee may not be regarded by the corporation as one of its
stockholders and the corporation may legally refuse the issuance of stock
certificates.
SET 10 MERGER and CONSOLIDATION
Gonzales v. PNB
(1) A stockholder who wants to avail of his right to inspect must set forth in his
request for inspection the reasons or purposes of his inspection.
(2) The right of inspection granted to a stockholder are the following: (1) the records
must be kept at the principal office of the corporation; (2) the inspection must be
made on business days; (3) the stockholder may demand a copy of the excerpts
of the records or minutes; and (4) the refusal to allow such inspection shall
subject the erring officer or agent of the corporation to civil and criminal liabilities.
(3) As a condition for such examination the one requesting it: (a) must not have been
guilty of using improperly any information secured through a prior examination,
and that (b) the person asking for such examinations must be "acting in good
faith and for a legitimate purpose in making his demand."
Associated Bank v. Court of Appeals
(1) Ordinarily, in the merger of two or more existing corporations, one of the
combining corporations survives and continues the combined business, while the
rest are dissolved and all their rights, properties and liabilities are acquired by the
surviving corporation. Although there is a dissolution of the absorbed
corporations, there is no winding up of their affairs or liquidation of their assets,
because the surviving corporation automatically acquires all their rights,
privileges and powers, as well as their liabilities.
Mindanao Savings and Loan Association, Inc. v. Willcom
(1) Merger or consolidation does not become effective by mere agreement of the
constituent corporations. Since merger or consolidation involves fundamental
changes in the corporation, as well as in the rights of stockholders and creditors,
there must be an express provision of authorizing them. In this jurisdiction, for a
valid merger or consolidation, the approval of the SEC is required.
Babst v. Court of Appeals
SEVILLA, CHOLO
S.Y. 2013-2014. SAN BEDA COLLEGE, ALABANG
BUSORG2 ATTY. BUSMENTE

(1) In merger, the receivables of the dissolved corporation are transferred to the
surviving corporation. Thus, the surviving corporation has the power to file an
action to recover any debt that pertains to the other corporation.
SET 12 NON-STOCK CORPORATIONS
Padcom Condominium Corporation v. Ortigas Center Association, Inc.
(1) A stipulation on automatic membership in an association annotated at the back of
the transfer certificate title binds the transferee and his successors in interest.
This is so because any lien annotated on previous certificates of title should be
incorporated in or carried over to the new transfer certificates of title. Such lien is
inseparable from the property as it is a right in rem, a burden on the property
whoever its owner may be. It subsists notwithstanding a change in ownership.
Sta. Clara Homeowners Association vs. Gaston
(1) Persons cannot be compelled to become members of an association by the
simple expedient of including them in its Articles of Incorporation and By-laws
without their express or implied consent. It is possible only if the owners
voluntarily agree, directly or indirectly, to become members of the association.
Long vs. Basa
(1) The basis of the relationship between a religious corporation and its members is
the latters absolute adherence to a common religious or spiritual belief. Once
this basis ceases, membership in the religious corporation must also cease.
Thus, generally, there is no room for dissension in a religious corporation. And
where, as here, any member of a religious corporation is expelled from the
membership for espousing doctrines and teachings contrary to that of his church,
the established doctrine in this jurisdiction is that such action from the church
authorities is conclusive upon the civil courts.
Tan vs. Sycip
(1) Membership in and all rights arising from a nonstock corporation are personal
and non-transferable, unless the articles of incorporation or the bylaws of the
corporation provide otherwise. In other words, the determination of whether or
not dead members are entitled to exercise their voting rights (through their
executor or administrator), depends on those articles of incorporation or bylaws.
SET 11- APPRAISAL RIGHT
Turner v. Lorenzo Shipping Corporation
(1) A stockholder who dissents from certain corporate actions has the right to
demand payment of the fair value of his or her shares. The right of appraisal may
be exercised when there is a fundamental change in the charter or articles of
incorporation substantially prejudicing the rights of the stockholders. It does not
vest unless objectionable corporate action is taken. However, no payment shall
be made to any dissenting stockholder unless the corporation has unrestricted
retained earnings in its books to cover the payment.
Cua v. Ocampo
(1) A derivative suit cannot prosper without first complying with the legal requisites
for its institution. A stockholder or member may bring an action in the name of a
corporation or association provided that no appraisal rights are available for the
act or acts complained of. The obvious intent behind the rule is to make the
derivative suit the final recourse of the stockholder after all other remedies to
obtain the relief sought have failed.
SET 13 CLOSE CORPORATIONS
San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals
(1) Mere ownership by a single stockholder of all or nearly all of the capital stock of a
corporation does not make one a close corporation if the requisites specified
under Section 96 are not stated in the Articles of Incorporation.
Manuel R. Dulay Enterprises, Inc. v. Court of Appeals
(1) Petitioner Corporation is classified as a close corporation and consequently a
board resolution authorizing the sale or mortgage of the subject property is not necessary to
bind the corporation for the action of its president.
SEVILLA, CHOLO
S.Y. 2013-2014. SAN BEDA COLLEGE, ALABANG
BUSORG2 ATTY. BUSMENTE

(2) A corporate action taken at a board meeting without proper call or notice in a close
corporation is deemed ratified by the absent director unless the latter promptly files his written
objection with the secretary of the corporation after having knowledge of the meeting.
SET 14 SPECIAL CORPORATIONS
IEMELIF v. Bishop Lazaro
(1) A corporation sole may be converted to a corporation aggregate through the
amendment of its Articles of Incorporation. Concurrence of 2/3 of the members of
the corporation sole is necessary for the amendment of the Articles of
Incorporation.
Roman Catholic Apostolic Church v. Land Registration Commission
(1) A corporation sole does not have any nationality but for purposes of applying out
nationalization laws, nationality is determined not by the nationality of its head,
but by the nationality of the members constituting the sect in the Philippines.
Thus, the Roman Catholic Church can acquire land in the Philippines even if it is
headed by the Pope.
SET 15 DISSOLUTION
Vesagas v. Court of Appeals
(1) The requirements (for dissolution) mandated by the Corporation Code should
have been strictly complied with by the members of the club. The records reveal
that no proof was offered by the petitioners with regard to the notice and
publication requirements. Similarly wanting is the proof of the board members'
certification. Lastly, and most important of all, the SEC Order of Dissolution was
never submitted as evidence.
Gelano v. Court of Appeals
(1) Even the lawyers who are handling cases for the corporation can be considered
the trustees of the assets of the dissolved corporation after the three-year period.
If no trustee is appointed, the corporation cannot be permitted to take advantage
of such non-appointment thereby allowing unjust enrichment at the expense of
creditors.
Phil. Veterans Bank Employees Union-N.U.B.E. v. Vega
(1) Liquidation, in corporation law, connotes a winding up or settling with creditors
and debtors. It is the winding up of a corporation so that assets are distributed to
those entitled to receive them. It is the process of reducing assets to cash,
discharging liabilities and dividing surplus or loss. It is crystal clear that the
concept of liquidation is diametrically opposed or contrary to the concept of
rehabilitation, such that both cannot be undertaken at the same time.
(2) On the opposite end of the spectrum is rehabilitation which connotes a reopening
or reorganization. Rehabilitation contemplates a continuance of corporate life and
activities in an effort to restore and reinstate the corporation to its former position
of successful operation and solvency.
Tan Tiong Bio v. CIR
(1) Corporate creditors may follow its assets as in the nature of trust fund into the
hands of the stockholders.
Rebollido v. Court of Appeals
(1) This continuance of its legal existence for the purpose of enabling it to close up
its business is necessary to enable the corporation to collect the demands due it
as well as to allow its creditors to assert the demands against it. If this were not
so, then a corporation that became involved in liabilities might escape the
payment of its just obligations by merely surrendering its charter, and thus defeat
its creditors or greatly hinder and delay them in the collection of their demands.
This course of conduct on the part of corporations the law in justice to persons
dealing with them does not permit. The person who has a valid claim against a
corporation, whether it arises in contract or tort should not be deprived of the
right to prosecute an action for the enforcement of his demands by the action of
the stockholders of the corporation in agreeing to its dissolution of a corporation
does not extinguish obligations or liabilities due by or to it.
SET 16 FOREIGN CORPORATIONS
Facilities Management Corporation v. De La Osa
(1) If a foreign corporation, not engaged in business in the Philippines is not barred
from seeking redress from courts in the Philippines, a fortiori, that same
SEVILLA, CHOLO
S.Y. 2013-2014. SAN BEDA COLLEGE, ALABANG
BUSORG2 ATTY. BUSMENTE

corporation cannot claim exemption from being sued in the Philippine courts for
acts done against a person or persons in the Philippines
The Home Insurance Company v. Eastern Shipping Lines
(1) Subsequent acquisition of the license will cure the lack of capacity at the time of
the execution of the contract. Hence, the foreign corporation can re-file the case
that was previously dismissed after acquiring a license.
Eriks PTE Ltd. V. Court of Appeals
(1) A foreign corporation without such license is not ipso facto incapacitated from
bringing an action a license is necessary only if it is "transacting or doing
business" in the country.
(2) What is determinative of "doing business" is not really the number or the quantity
of the transactions, but more importantly, the intention of an entity to continue the
body of its business in the country. The number and quantity are merely
evidence of such intention. The phrase "isolated transaction" has a definite and
fixed meaning. Whether a foreign corporation is "doing business" does not
necessarily depend upon the frequency of its transactions, but more upon the
nature and character of the transactions.
Hutchison Ports Philippines Limited v. Subic Bay Metropolitan Authority
(1) Participating in the bidding process constitutes "doing business" because it
shows the foreign corporation's intention to engage in business here. The bidding
for the concession contract is but an exercise of the corporation's reason for
creation or existence.
(2) It is the performance by a foreign corporation of the acts for which it was created,
regardless of volume of business, that determines whether a foreign corporation
needs a license or not. The primary purpose of the license requirement is to
compel a foreign corporation desiring to do business within the Philippines to
submit itself to the jurisdiction of the courts of the state and to enable the
government to exercise jurisdiction over them for the regulation of their activities
in this country.
MR Holdings, Ltd. v. Bajar
(1) Apparently, it is not the absence of the prescribed license but the doing (of)
business in the Philippines without such license which debars the foreign
corporation from access to our courts.
SET 17 SECURITIES REGULATION CODE
Sumndad vs Harrigan

(1) It was held that the jurisdiction of the courts are conferred by law and determined
by allegations in the complaint according to RA 8799 intracorporate disputes falls
within the jurisdiction of RTF and no longer the SEC.

Orendain vs BF Homes Inc

(1) The better policy in determining which body has jurisdiction over a case would be
to consider not only
[1] the status or relationship of the parties but also
[2] the nature of the question that is the subject of their controversy

Section 5.2 of RA 8799 transferred exclusive and original jurisdiction of the SEC over
actions involving intra-corporate controversies to the courts of general jurisdiction or the
appropriate RTC. In the transition, all intra-corporate cases pending in the SEC, which were
not ripe for adjudication as of August 8, 2000, were turned over to the RTC. Congress thereby
recognized the expertise and competence of the RTC to take cognizance of and resolve cases
involving intra-corporate controversies. Thus, "whether or not the issue is intra-corporate, it is
now the [RTC] and no longer the SEC that takes cognizance of [and resolves cases involving
intra-corporate controversies.

Velarde vs Lopez

(1) A corporate officer's dismissal is always a corporate act or an intra-corporate
controversy.

Timeshare Realty Corporation vs Cesar Lao

(1) Section 4 of BP 178 provides that "no securities, exempt under any provisions of
SEC 5 or unless sold in any transaction exempt under section 6, shall be sold or
SEVILLA, CHOLO
S.Y. 2013-2014. SAN BEDA COLLEGE, ALABANG
BUSORG2 ATTY. BUSMENTE

offered for sale or distribution to the public within the Phil. Unless such securities
have been registered and permitted to be sold as herein after provided."
Union Bank of the Phil vs SEC

(1) A commercial banking corporation listed in the stock exchange must adhere not
only to banking and other allied special laws, but also to the rules promulgated by
Respondent SEC, the government entity tasked not only with the enforcement of
the Revised Securities Act, but also with the supervision of all corporations,
partnerships or associations which are grantees of government-issued primary
franchises and/or licenses or permits to operate in the Philippines.

Onapal Phil Commodities vs CA

(1) If a contract which purports to be for the delivery of goods, securities or shares of
stock is entered into with the intention that the difference between the price
stipulated and the exchange or market price at the time of the pretended delivery
shall be paid by the loser to the winner, the transaction is null and void. The loser
may recover what he has paid

CEMCO Holdings Inc vs National Life Insurance Co.

(1) If there shall be violation of this Rule by pursuing a purchase of equity shares of
a public company at threshold amounts without the required tender offer, the
Commission, upon complaint, may nullify the said acquisition and direct the
holding of a tender offer. This shall be without prejudice to the imposition of other
sanctions under the Code.

The foregoing rule emanates from the SEC's power and authority to
regulate, investigate or supervise the activities of persons to ensure compliance with
the Securities Regulation Code, more specifically the provision on mandatory tender
offer under Section 19 thereof.

Philippine Veterans Bank vs Justina Callangan

(1) It is clear that a "public company," as contemplated by the SRC, is not limited to
a company whose shares of stock are publicly listed; even companies like the
Bank, whose shares are offered only to a specific group of people, are
considered a public company, provided they meet the requirements.

Abacus Securities vs Ampil

(1) In securities trading, the brokers are essentially the counter parties to the stock
transactions at the exchange. Since the principals of the broker are generally
undisclosed, the broker is personally liable for contracts made.

SEC vs Interport Resources Corporation

(1) The insider's misuse of nonpublic and undisclosed information is the gravamen of
illegal conduct. The intent of the law is the protection of investors against fraud,
committed when an insider, using secret information, takes advantage of an
uninformed investor.
Insiders are obligated to disclose material information to the other party
or abstain from trading the shares of his corporation. This duty to disclose or
abstain is based on two factors:
1. The existence of a relationship giving access, directly or
indirectly, to information intended to be available only for a
corporate purpose and not for the personal benefit of anyone;
2. The inherent unfairness involved when a party takes advantage
of such information knowing it is unavailable to those with whom he
is dealing.