Professional Documents
Culture Documents
I Corporation Law
FELICIANO vs. Commission on Audit
Congress cannot enact a law creating a private corporation with a special
charter.
Local water districs are not private corporations because they are not created
under the Corporation Code. Local water districts exist by virtue of PD 198, which
constitutes their special charter.
Since under the Constitution only GOCCs may have special charters, Local
water districts can validly exist only if they are government owned or controlled.
To claim that local water districs are private corporations with a special
charter is to admit that their existence is constitutionally infirm.
Magsaysay-Labrador vs. CA
Shareholders are in no legal sense owners of corporate property, which is
owned by the corporation as a distinct person.
Sulo ng Bayan vs. Araneta
Absent any showing of interest, a corporation has no personality to bring an
action to recover property belonging to its members or stockholders in their personal
capacities.
Bataan Shipyard and Engineering Co., Inc. vs. PCGG
The right of self-incrimination has no application to juridical persons.
While an individual may lawfully refuse to answer incriminating questions
unless protected by an immunity statute, it does not follw that a corporation, vested
with special privileges and franchises, may refuse to show its hand when charged
with an abuse of such privileges. There is a reserved right on the part of the
legislature to inquire if the corporation has abused its privileges.
Luxuria Homes vs. CA
The following are the tests in determining the applicatbility of the doctrine of
piercing the veil of corporate fiction:
a. There must be control, not mere majority or complete stock control, but
complete domination, not only of finances, but of policy, and business
practice in respect to the transaction attacked so that the corporate entity
as to this transaction had, at that time, no separate mind, will or existence
of its own;
b. Such control must have been used by the defendant to commit fraud or
wrong, to perpetrate the violation of a statutory or other positive duty, or
dishonest and unjust act in contravention of plaintiffs legal rights; and
c. Such control and breach of duty must proximately cause the injury to the
plaintiff.
Villarey Transit vs. Ferrer
The corporate veil may be pierced to enforce a non-competition clause
entered into by the controlling stockholder in his personal capacity, if the same is
urged as a means of perpetrating a fraud or an illegal act or as a vehicle for the
evasion of an existing obligation, the circumvention of statutes, the cachievment or
perfection of a monopoly or generally, the perpetration of knavery or a crime.
The veil with which the law covers and isolates the corporation from the
members or stckholders who compose it will be lifted to allow for its consideration
merely as an aggregation of individuals.
Fransisco Motors Corporation vs. CA
obligations of the stockholders are not the obligations of the corporation.
enforsed for deposit only to the payees account and not to be further negotiated,
resulting in damage to the corporatin may be personally liable therefore.
BA Savings Bank vs. SIA
The certificate of non-forum shopping required by S.C. Circular 28-91 may be
signed, by a specifically authorized lawyer who has personal knowledge of the facts
to be disclosed in such document.
Unlike natural persons, corporations may perform physical actions only
through properly delegated individuals, namely, its officers and/or agents.
Inter-Asia Investment Industries, inc. vs. CA
An officer of a corporation who is authorized to purchase the stock of another
corporation has the implied power to perform all other obligations areising therefrom
such as payment of shares of stock.
Lapu-Lapu Foundation, inc. vs. CA
If a corporation konowingly permits one of its officers to act within the scope
of an apparent authority, it holds him out to the public as possessing the power to do
those acts; and thus, the corporation will, as against anyone who has in good faith
dealt with it through such agent, be estopped form denying the agents authority.
Hydro Resources Contractors Corporation vs. NIA
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.
A corporation may be estopped from denying as against a third person the
authority of its officers or agents who have been clothed by it with ostensible or
apparent authority.
Although an officer or agent acts without or in excess of his actual authority
but acts within the scope of an apparent authorit with which the corporation has
clothed him by holding out or permitteing him to appear as having such authority,
the corporation is bound thereby in foavor of a person who deals with him in good
faith in reliance on such apparent authority.
Monfort Hermanos Agricultural Development Corporation vs. Monfort III
To correct the alleged error in the General Information Sheet, the retained
accountant of the Corporation informed the SEC the non-inclusison of the lawfully
elected directors was attributable to the oversight and not the fault of the
By NIKKO LAGMAY and ANGELO FERNANDO
San Sebastian Law
Corporation. This belated attempt, however, did not erase the doubt as to whether
an election was indeed held.
By the express mandate of the Corporation Code, Sec. 26, all corporations
duly organized pursuant thereto are required to submit within the period stated
therein (30 days) to the SEC the names, nationalities, and residences of the
directors, trustees and officers elected.
Lyceum of the Philippines vs. CA
The fact that other schools use Lyceum as part of their schools name is not
a deceptive use thereof relative to Lyceum of the Philippines.
Under the doctrine of secondary meaning, a word or phrase originally
incapable of exclusive appropriation with reference to an article appropriation with
relevance to an article on the market, because geographically or otherwise
descriptive, might nevertheless have been used so long and so exclusive by one
producer with reference to his article that, in that trade and to that brance to the
purchasing public, the work or phrase has come to mean that the article was his
product.
Ang Mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus, HSK vs. Iglesia ng Dios
Parties organizing a corporation must choose a name at their peril; and the
use of a name similar adopted by another corporation, whether a business or a
nonprofit organization, if misleading or likely to injure in the exercise of its corporate
functions, regardless of intent, may be prevented by the corporation having prior
right, by a suit for injunction against the new corporation to prevent the use of
name.
Ordering a religious society or corporation to change its corporate name is not
a violation of its constitutionally guaranteed right to religious freedom. In so doing,
the SEC merely compelled petitioner to abide by one of the SEC guifelines in the
approval of corporate names, namely its undertaking to manifest its willingness to
change its corporate name in the event another person, firm, or entity has acquired
a prir right to use the said firm name or one deceptively or confusingly similar to it.
Industrial Refractories Corporation of the Philippines vs. CA
Confusing and deceptive similarity of corporate names prohibited under
section 18 of the Corporation Code.
IG Summit Holdings vs. CA
Associated Bank v. CA
The merger does not become effective upon the mere agreement of the
constituent corporations- the merger shall be effective only upon the issuance by the
SEC of a certificate of merger.
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By NIKKO LAGMAY and ANGELO FERNANDO
San Sebastian Law
Babst v. CA
It is settled that in the merger of two existing corporations, one of the
corporations survives and continues the business, while the other is dissolved and all
its rights, properties and liabilities are acquired by the surviving corporation.
Long v. Basa
Section 91 of the Corporation Code provides that membership shall be
terminated in the manner and for the causes provided in the articles of incorporation
or the by- laws.
In the case at bar, the petitioners really have no reason to bewail the lack of
prior notice in the By- laws. They have waived such notice by adhering to those Bylaws. They became members of the Church voluntarily. They entered into its
covenant and subscribed to its rules. By doing so, they are bound by their consent.
Consequently, the expulsion was not tained with any arbitrary treatment
from the members of the Board of Directors who, since 1988 up to August 30, 1993,
or approximately 5 years, have patiently exhorted and warned the dissident
members. This long period of time is more than adequate an opportunity for the
erring members and their followers to contemplate upon their covenant with the
Church on their duty to protect and promote its Principled of Faith and not to violate
them.
It is a well settled principle in law that what due process contemplates is
freedom from arbitrariness, what it re quires is fairness and justice, substance rather
than form, being paramount. What it prohibits is not the absence of previous notice
but the absolute absence thereof. A formal or trial type hearing is not at all times
and in all instances essential.
Sta. Clara Homeowners Association v. Gaston
Homeowners cannot be compelled to become members of a homeowners
association by the simple expedient of including them in its Article of Incorporation
and By- laws without their express or implied consent, without violating the
constitutionally guaranteed freedom of association.
PADCOM Condominium Corporation v. Ortigas Center Association, Inc.
If among the terms and conditions in a deed of sale, there is a requirement
that the transferee must become member of as association, the same binds the
holder of the title and the whole world. It cannot be argued that there is a violation
of freedom of association because the transferee was never forced to become a
member of the association.
Manuel R. Dulay Enterprises, Inc. v. CA
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. At any rate, 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
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By NIKKO LAGMAY and ANGELO FERNANDO
San Sebastian Law
his written objection with the secretary of the corporation after having knowledge of
the meeting which, in this case, petitioner Virgilio Dulay failed to do.
San Juan Structural and Steel Fabricators, Inc. v. CA
A corporation does not become a close corporation just because a man and
his wife owns 99.866% of its subscribed capital stock. So, too, a narrow distribution
of ownership does not, by itself, make a close corporation.
Facilities Management Corporation v. De La Rosa
A foreign corporation not doing business in the Philippines may be sued here
for acts done against persons in the Philippines.
Home Insurance Company v. Eastern Shipping Lines
Insofar as litigation is concerned, the foreign corporation or its assignee may
not maintain any suit for the recovery of any debt, claim or demand whatever.
A contract entered into by a foreign insurance corporation not licensed to do
business in the Philippines is not void. The statute does not fix any time within which
foreign corporations shall comply with the Act. If such contracts were void, no suits
could be prosecuted on them in any court. The primary purpose of our statute is to
compel a foreign corporation desiring to do business within the state to submit itself
to the jurisdiction of the courts of their state.
Mentholatum Co., Inc. v. Mangiliman
The true test to determine whether a foreign company is doing business in
the Philippines is whether the foreign corporation is continuing the body or
substance of the business or enterprise for which it was organized or whether it has
substantially retired from it and turned it over to another.
Eriks Pte., Ltd. v. CA
The grant and extension of 90- day credit terms by a foreign corporation to
do a domestic corporation for every purchase made unarguably shows an intention
to continue transacting with the latter since in the usual course of commercial
transactions, credit extended only to customers in good standing or to those on
whom there is an intension to maintain long- term relationship.
MR Holdings, Inc. v. Bajar
While petitioner may just be an assignee to the Deed of Assignment, it may
still fall within the meaning of doing business based on the ruling of the Supreme
Court that where a single act or transaction however is not merely incidental or
casual but indicates the foreign corporations intention to do other business in the
Philippines, said single act or transaction constitutes doing or engaging in or
transacting business in the Philippines.
Hutchison Ports Philippines Limited v. SBMA
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II - NEGOTIABLE INSTRUMENTS
Firestone Tire and Rubber Company vs. CA
The essence of negotiability which characterizes a negotiable paper as a credit
instrument lies in its freedom to circulate freely as a substitute for money.
Caltex vs. CA
In determining the negotiability of an instrument, the instrument in its
entirety and what appears on its fact must be considered.
It must comply with the requirements of sec. 1, Act. No. 2031
Philippine Education Company vs. CA
Postal money orders are not negotiable intruments.
It does not contain ac unconditional promise or order to pay required in Sec.
1 of the NIL.
Regulations and restrictions imposedc on postal money orders are inconsisten
with the character of negotiable instruments.
Tibajia, Jr. vs. CA
A check, whther managers check or ordinary check, is not legal ender, and
an oofer of a check in payment of a debt is not a valid tender of payment and may
be refused recept by the creditor.
PAL vs. CA
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A check, whether managers check or ordinary check, is not legal tender, and
an offer of a check in payment of a debt is not a valid tender of pament and may be
refused receipt by the creditor.
Sesbreno vs. CA
An instrument thaough marked non-negotiable, may nevertheless be
assigned or transferred.
Metrbank vs. CA
Treasury warrants are non-negotiable instrument because there is an
indication of the fund as the source of pament of the disbursement.
Ang Tek Lian vs. CA
A check payable to the order of cash is a check payable to bearer, and the
bank may pay it to the person presenting it for payment without the drawers
indorsement.
PNB vs Manila Oil Refining And By products Company Inc
Provisions in notes authorizing attorbeys to appear and confess judgments
against makers should not be recognized in this jurisdiction because the same is
considered void for being against public policy.
However, sec. 5 of the NIL provides that the negotiable character of an
instrument therwise negotiable is not affected by a provision which authorizes
confession of judgment if the instrument be not paid at maturity.
In other words, only the stipulation is avoided.
Republic Planters Bank vs. CA
Where an instrument containing the words I promise to pay is isgned by
two or more persons, they are deemed to be jointly and severally liable thereon.
The phrase and in his personal capacity below the signatures of the makers
in the note will not affect the liability of the makers.
GSIS vs. CA
An instrument that is payable to a specified person or entity is not negotiable
because the NIL requires that the instrument must be payable to order or the bearer.
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By NIKKO LAGMAY and ANGELO FERNANDO
San Sebastian Law
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Although a depositor owes a duty to his drawee bank to examine his cancelled
checks for forgery of his own signature, he has no similar duty to forged
instruments.
The negligence of a depositor which will prevent recovery of an unauthorized
payment is based on failure of the depositor to act as a prudent businessman would
under the circumstances.
De Ocampo vs. Gatchalian
Gross negligence may amount to legal absence of good faith.
Where a holders title is defective or suspicius, it cannot be stated that the
payee acquired the check without the knowledge of said defect in holders title, and
for this reason the presumption that it is a hlder in due cours or that it acquired the
instrument in good faith does not exist.
Stelco Marketing Corporation vs. CA
Lack of notice of any infirmity in the instrument r defect in the title of the
person negotiating it does not apply to an accommodation party.
Bataan Cigar and Cigarrette Factory vs. CA
A person who takes a crssed check without making further inquiries is not a
holder in due course.
The act of crossing a check produces the following effects:
a. the check may not be encashed but only deposited in the bank:
b. the check may be negotiated only once to on e who has an account
with the bank; and
c. the act of crossing the check serves as warning to the hlder that the
check has been issued for a definite purpose so that he must inquire if
he has received the check pursuant to that purpose, otherwise, he is
not a holder in due course.
State Investment House vs. CA
The fact that a check is merely issued as security is not a ground for the
discharge of the instrument against a holder in due course.
PNB vs. Picornell
The drawee by accepting becomes liable to the payee or his indorsee, and
also to the drawer himself. But the drawer and acceptor are immediate parties to the
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By NIKKO LAGMAY and ANGELO FERNANDO
San Sebastian Law
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PNB vs. CA
An alteration of the serial number of a check does not constitute material
alteration because it does not alter the effect of the insturmetn, nor des it modify in
any respect the obligation of a party thereto.
It does not change the items which aree required to be stated under sec. 1 of
the NIL.
Associated Bank vs. CA
In bearer instruments, the signature of the payee or holder is unnecessary to
pass title to the instrument. Hence, the maker may still be liable to a holder in due
cours even if an indorsement was forged after the issuance of the note.
The liability chain ends with the drawee bank whose responsibility is to know
the drawers signature since the latter is its customer.
Great Eastern Life Insurance co. vs. HSBC
It is the obligation of the collecting bank to reimburse the drawee bank the
value of the checks subsequently found to contain forged indorsement of the payee.
The reason is that the bank with which the check was deposited has no right
to pay the sum stated therein to the forger or any one else upon a forged signature.
It is the collecting banks duty to know that the indorsement is genuine before
cashing the check.
Republic vs. Ebrada
The indorser is liable on the insruemtn although the signature of the payee is
forged because the indorser by his indorement guaranteed that the instrument is
genuine, therefore, impliedly, that the instrument is valid, otherwise, there wuld be
nothing for the indorser to guarantee.
Philippine Commercial International Bank vs. CA
The prescriptive period for the filing of a claim based on negotiable
instruments is ten years from the time the cause of action accrued.
In case of checks, the action of the depositor against his drawee bank
commences to run from the time he is given notice of payment.
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Said certification implies that the check is drawn upon sufficient funds un the
hands of the drawee, that they have been set apart for its satisfaction, and that they
shell be so applied whenever the check is presented for payment.
PNB vs. National City Bank of New York
The certification of checks is a means in constant and extneseve use in the
business of banking, and its effects and conseqences are regulated by the law of
merchant.
Sps. Moran vs. CA
Failure of a bank to pay the check of a merchant or a trader, when deposit is
sufficient, entitles the drawer to substantial damages without any proof of actual
damages.
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