You are on page 1of 30

CORPO CASES

Albert vs. University Publishing Company, Inc., 13 SCRA 84 (1965)
Where a corporation, through its president, entered into a contract with another
for the exclusive right to publish his book but the corporation failed to pay the
contract price, the judgment rendered against the corporation may be enforced
against the president who participated all through out the hearings when it
turned out that the corporation is not duly registered with the Securities and
Exchange Commission. The real defendant in a suit against a corporation with no
valid existence is the person who has control of its proceedings
Benny Hung vs BPI Finance Corporation . G.R. No. 182398, 20 July 2010
When the corporation ( BB Sportswear, Inc. ) which the plaintiff erroneously
impleaded in a collection case was not the party to the actionable agreement and
turned out to be not registered with the Securities and Exchange Commission,
the judgment may still be enforced against the corporation ( BB Footwear, Inc. )
which filed the answer and participated in the proceedings, as well as its
controlling shareholder who signed the actionable agreement in his personal
capacity and as a single proprietorship doing business under the trade name and
style of BB Sportswear Enterprises.
International Express Travel & Tours vs. Court of Appeals, 373 SCRA 474
(2002)
The President of a sports association which is registered with the Securities and
Exchange Commission but which did not comply with the statutory requirements
under related laws to be able to acquire a legal personality is personally liable for
the airline tickets he purchased from a travel agency even though it is for the
benefit of the athletes who are members of the sports association. Any person
acting or purporting to act on behalf of a corporation which has no valid
existence becomes personally liable for contract entered into and for other acts
performed as such agent.
Boyer Roxas vs. Court of Appeals, 211 SCRA 470 (1992)
Properties registered in the name of the corporation are owned by it as an entity
separate and distinct from its members. While shares of stock constitute personal
property, they do not represent property of the corporation. The corporation has
property of its own. A share of stock only typifies an aliquot part of the
corporation’s property, or the right to share in its proceeds to that extent when
distributed according to law and equity but its holder is not the owner of any part
of the capital of the corporation. A corporation can therefore sue to recover real
property being occupied by its former president (who was also a significant
stockholder) for it has a juridical personality separate and distinct from its
stockholders even though in the past the corporation allowed the president to
enjoy the possession of the property.
Ryuichi Yamamoto vs. Nishino Leather Industries, Inc. and Ikuo Nishino
551 SCRA 447 (2008)
Where the lawyer of the controlling stockholder of the corporation advised
another stockholder that he could obtain possession of certain corporate
properties by way of return for his equity investment but the lawyer acted

without board approval, the advice is not binding on the corporation even though
it had the approval of the controlling stockholder. The doctrine of piercing the veil
of corporate fiction can not be invoked on the sole ground that the presence of
other stockholders in the corporation was only for the purpose of complying with
the statutory minimum requirements on number of directors.
Silverio vs. Filipino Business Consultants, Inc. 466 SCRA 584 (2005)
The acquisition by a corporation of the “substantial and controlling shares of
stocks” in two other corporations merely represents a proportionate or aliquot
interest in the properties of the two corporations and does not make it the owner
of the property which is legally owned by the two corporations as distinct
juridical persons. As such, the acquirer corporation is not entitled to the
possession of any definite portion of the property or any of the assets of the other
corporations. The representative designated by the corporations is authorized to
continue the possession of corporate properties despite change in share
ownership unless otherwise replaced by the corporations.
Lim vs. CA, 323 SCRA 102 (2000)
In as much as the real properties included in the inventory of the estate of a
deceased stockholders are in the possession o4f and registered in the name of
the corporations, which under the law has a personality separate and distinct
from their stockholders, and in the absence of any basis to shred the veil of
corporate fiction, the presumption of conclusiveness of said titles in favor of said
corporations should stand undisturbed. Thus, the inclusion in the estate of the
deceased stockholder properties under the name of various corporations was
erroneous even though the corporations were owned and controlled by the
deceased stockholder during his lifetime.

Land Bank of the Philippines vs. Court of Appeals, 364 SCRA 375 (2001)
The mere fact that Oñate owned the majority of the shares of ECO is not a ground
to conclude that Oñate and ECO are one and the same. Mere ownership by a
single stockholder of all or nearly all of the capital stock of a corporation is not by
itself sufficient reason for disregarding the fiction of separate corporate
personalities. Neither is the fact that the name “ECO” represents the first 3
letters of Oñate’s name a sufficient reason to pierce the veil. A corporation may
assume a name provided it is lawful. There is nothing illegal in a corporation
acquiring the name or as in this case, the initials of one of its shareholders.

PNB vs. Ritratto Group, Inc., 362 SCRA 216 (2001)
If used to perform legitimate functions, a subsidiary’s separate existence may be
respected and the liability of the parent corporation as well as the subsidiary will
be confined to those arising in their respective businesses. When a borrower
failed to pay credit accommodations granted by a subsidiary of a banking
corporation, the suit against the parent company to direct it to re-compute the
rescheduling of the interest to be paid and to enjoin the foreclosure initiated by
the parent company as attorney-in-fact of the subsidiary will not prosper because
the two corporations are separate and distinct from each other. Aside from the
fact that the lender is a wholly-owned subsidiary, there is no showing that it is a

mere instrumentality of the parent company. The parent-subsidiary relationship
between the two corporations is not the significant relationship involved in this
case since the parent company was not sued because it is the parent company of
the lender. Rather, it was sued because it acted as attorney-in-fact of the lender
in initiating the foreclosure proceedings. A suit against an agent cannot without
compelling reasons, be considered a suit against the principal.
Spouses Ramon Nisce vs. Equitable PCI Bank 516 SCRA 231 (2007)
When an investor has a claim against a subsidiary of another corporation which
subsequently became the acquired corporation in a merger, the claim against the
subsidiary can not be enforced against the surviving corporation even though the
latter corporation by virtue of the merger acquired all the shares of the absorbed
corporation. This is because the fact that a corporation owns almost all of the
stocks of another corporation, taken alone, is not sufficient to justify their being
treated as one entity.
Indophil Textile Mill Workers Union PTGWO vs. Calica, 205 SCRA 697
(1992)
The fact that the businesses of two corporations are related, as one manufactures
yarns while the other sells the same product; some employees of one are the
same persons manning and providing for auxiliary services to the other, and the
physical plants, offices and facilities are situated in the same compound, are not
sufficient to justify the piercing of the corporate veil of either corporation. The
legal corporate entity is disregarded only if it is sought to hold the officers and
stockholders directly liable for a corporate debt or obligation and not when the
only issue is whether or not the rank and file employees working at the second
corporation should be recognized as a part of and/ or within the scope of the
bargaining unit of the first corporation.
Filipinas Broadcasting Network vs. Ago Medical and Educational Center
448 SCRA 413 (2005)
A juridical person is generally not entitled to moral damages because unlike
natural persons it can not experience physical suffering or such sentiments as
wounded feeling, serious anxiety, mental anguish and mental shock.
Nevertheless, if a corporation’s claim for moral damages falls under section 7
Article 2219 of the Civil Code which authorizes recovery of moral damages in
cases of libel, slander or any form of defamation, then moral damages may be
awarded. This is because. Article 2219 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.

Meralco v. TEAM Electronics Corp. 540 SCRA 62 (2007)
As a rule, a corporation is not entitled to moral damages because, not being a
natural person, it cannot experience physical suffering or sentiments like
wounded feelings, serious anxiety, mental anguish and moral shock. The only
exception to this rule is when the corporation has a reputation that is debased,
resulting in its humiliation in the business realm. But in such a case, it is

the corporation is not entitled to moral damages. the third party claim filed by the other corporation was set aside and the levy on its property held valid even though the latter was not made a party to the case . The judgment may be enforced against the other corporation to prevent multiplicity of suits and save the parties unnecessary expenses and delay. Heirs of Maria Concepcion Lacsa. Judge Amor Reyes. in one case . claim of laborers for backwages. where the records are bereft of any evidence that the name or reputation of a corporation has been debased as a result of Meralco’s act. vis-à-vis. Ferrer. Kukan International Corporation vs. 182729.imperative for the claimant to present proof to justify the award. 159108. Villa Rey Transit vs. for clearly the legal fiction was being used to evade the contractual restriction. Supreme Court ruled that if the RTC had sufficient factual basis to conclude that the two corporations are one and the same entity as when they have the same President and controlling shareholder and it is generally known in the place where they do business that they are one. 25 SCRA 845 (1968) Where an operator of a bus transportation sold certificates of public convenience under which he was authorized to operate certain number of buses with a condition that he shall not for a period of ten years from date of the sale apply for any TPU service identical or competing with the buyer. 18 June 2012 However. No. National Labor Relations Commission. 150 SCRA 498 (1987) Sale of corporate assets to another corporation organized previously by the same officers of the vendor and engaged in the same line of business. the legal personality of the corporation which he organized and controlled through his wife and brotherin-law whose business competes with the buyer may be disregarded. Gold Line Tours vs. Ransom Labor Union–CCLU vs. G. Thus.C. is an instance where corporate veil should be pierced. using the machineries of the vendor in the same factory. Hon. . which in this case is the disconnection of the electricity supply to the building of the corporation ( without written notice ) due to non-payment of differential billing representing unregistered consumption for alleged tampering with the electric meter. A. GR No. and the doctrine of piercing the veil of corporate entity can only be raised during a fullblown trial over a cause of action duly commenced involving parties duly brought under the authority of the court by way of service of summons or what passes as such service.R. 29 September 2010 The court must first acquire jurisdiction over the corporation or corporations involved before its or their separate personalities are disregarded.

a corporation sold its franchise as well as most of its bus units to a company controlled by the daughter of the controlling shareholder of the assignor corporation where daughter is also a director. Court of Appeals. 257 SCRA 149 (1996) (1) Control. February 13. b) the two corporation share the same office and practically transact their business from the same place.. 451 SCRA 587 (2005) Piercing the corporate veil is warranted if in the middle of a labor dispute. administrative and finance policies. and (3) the aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of. National Labor relations Commission. International Exchange Bank. hires the employees. but complete domination. Inc. to perpetuate the violation of a statutory or other positive legal duty. Reynoso vs. the same may be considered a de facto corporation whose right to exercise corporate powers may . The manager of the subsidiary could therefore enforce his claim against the parent company even though his employment is with the subsidiary. such third party mortgagor may be required to pay the deficiency between the loan obligation and the proceeds of the sale if it is only an instrumentality or alter ego of the borrower corporation. not only of finances but of policy and business practice in respect to the transaction attacked such that the corporate entity as to this transaction had at that time no separate mind. vs. Concept Builders. will or existence of its own. A subsidiary is considered a mere instrumentality of the parent company if the latter determines the personnel. The two corporations were treated as one entity because of the following factors : a ) both corporations are family corporations of the same controlling shareholder. Court Of Appeals 459 SCRA 516 (2005) In case the corporation fails to submit its by-laws on time. (2) Such control must have been used by the defendant to commit fraud or wrong. 2013 While a third party mortgagor is liable only up to the extent of the value of the mortgaged property. Inc. or dishonest or unjust act in contravention of plaintiffs legal right. and. Sawadjaan vs.. d ) the promissory notes were signed by the same person as President of the borrower corporation and President of the mortgagor corporation. Sotelo. e ) the assets of the two corporations are co-mingled. It is evident that the transaction was made in order to remove the corporation’s remaining assets from the reach of any judgment that may be rendered in the unfair labor practice case filed against it. vs. not mere majority or complete stock control.Times Transportation Co. c ) they had a common President. Heirs of Fe Tan Uy vs. and funds the operations of the former. 345 SCRA 335 (2000) The defense of separateness will be disregarded where the business affairs of a subsidiary corporation are so controlled by the mother corporation to the extent that it becomes an instrument or agent of its parent.

2011 Although the Philippine National Red Cross was created by a special charter. Corporation by estoppel is founded on principles of equity and is designed to prevent injustice and unfairness. Pioneer Surety & Insurance Corporation vs. Gordon. People vs. Liban vs.. it can not be considered a government-owned and controlled corporation in the . who know that it has not been registered. The SEC Rules on Suspension/Revocation of the Certificate of Registration of Corporations. Inc. the proposed consolidated corporation cannot be considered a corporation by estoppel. GR No. Such legislation would be unconstitutional. 175 SCRA 668 (1989) Where someone convinced other parties to contribute funds for the formation of a corporation which was never formed. 175352. liabilities and damages incurred or arising as a result thereof. 271 SCRA 621 (1997) The persons who illegally recruited workers for overseas employment by representing themselves to be officers of a corporation which they knew had not been incorporated are liable as general partners for all debts. Commission on Audit. Delos Santos. details the procedures and remedies that may be availed of before an order of revocation can be issued. there is no partnership among them. 317 SCRA 728 (1999) A person who has reaped the benefits of a contract entered into by others with whom he previously had an existing relationship is deemed to be part of said association and is covered by the scope of the doctrine of corporation by estoppel. Court of Appeal. 464 Philippine Reports 439 ( 2004 ) Congress can not enact a law creating a private corporation with a special charter.not be inquired into collaterally in any private suit to which such corporation may be a party. If the corporation is private. and where there is no third party involved and the conflict arises only among those assuming the form of a corporation. it must necessarily exist under a general law. since there is no third person involved and the two presidents knew the consolidated corporation had not been registered. Philippine Fishing Gear Industries. In dispute between the presidents of the two associations which agreed to consolidate but were not actually consolidated. and the latter cannot be held liable to share in the losses of the proposed corporation. Feliciano vs. The revocation can not be ordered if there is no showing that such a procedure has been initiated. Moreover. Private corporations may exist only under a general law. 272 SCRA 452 (1997) Lim Tong Lim vs. a corporation which has failed to file its by-laws within the prescribed period does not ipso facto lose its powers as such. there is no corporation by estoppel Lozano vs. Garcia. January 10.

Inc. 270 SCRA 298 (1997). PNRC has a sui generis status. Javier & Sons. so much so that Gordon was correctly allowed to hold his position as Chairman thereof concurrently while he served as a Senator. It does not have government assets and does not receive any appropriation from the Philippine Congress. Acebedo Optical Company. circular or regulation requiring it. the corporation shall not be considered government owned and controlled until the quantification of shares is resolved with finality. Carandang vs. . that must be organized under the Corporation Code. therefore. voluntary organization. 148076. such a conclusion does not ipso facto imply that the PNRC is a “private corporation” within the contemplation of the provision of the Constitution. discretionary on the bank.4%. Unless there is a law. gender. whose mission is to bring timely. Court of Appeals 462 SCRA 36 (2005) The Court cannot impose on a bank that changes its corporate name the obligation to notify a debtor of such change absent any law. Consequently. Desierto. 381 SCRA 293 (2002) A corporation engaged in the business of selling optical lenses or eyeglasses and which hires optometrists is not engaged in the practice of optometry because the determination of the proper lenses to sell to its clientele entails the employment of optometrists who have been trained precisely for this purpose.absence of the essential elements of ownership and control by the government. Acebedo International Corporation. 2011 A government–owned or controlled corporation refers to any agency organized as a stock or non-stock corporation vested with functions relating to public needs whether governmental or proprietary in nature and owned by the government through its instrumentalities either wholly or where applicable as in the case of stock corporation to the extent of at least 51% of its capital stock. agency. The PNRC enjoys a special status as an important ally and auxiliary of the government in the humanitarian field in accordance with its commitments under international law. social status or political affiliation. v.. race. or instrumentality of the government. The formal notification is. especially since the issue of the constitutionality of the PNRC Charter was never raised by the parties. Such act would be judicial legislation. such notification remains to be a mere internal policy that banks may or may not adopt. religion. Inc. P. GR No. This Court cannot all of a sudden refuse to recognize its existence. January 12.C. nor a government-owned or -controlled corporation or a subsidiary thereof. donor-funded. effective and compassionate humanitarian assistance for the most vulnerable without consideration of nationality. This does not mean however that the charter of PNRC is unconstitutional. When a stockholder ceded to the government shares representing 72. the defense that debtors should first be formally notified of the change of corporate name before they will continue paying their loan obligations to the bank is untenable. It is a non-profit. Samahan ng Optometrists vs.4 % of the voting stock of the corporation but subsequently clarified that it should be reduced to 32. Although it is neither a subdivision. regulation or circular from the SEC or BSP requiring the formal notification of all debtors of banks of any change in corporate name.

No. the term "capital" in Section 11. The same test should also be applied in determining if the paid-up capital of the Corporation has been impaired so as to qualify it for exemption from the increase in the minimum wage. 269 SCRA 173 (1997) Since the paid-up capital is the portion of the capital which has been subscribed and paid.” A broad definition unjustifiably disregards who owns the all-important voting stock. . or (b) deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law. to wit:  that the complainant corporation acquired a prior right over the use of such corporate name. June 28.. In short. the term "capital" in Section 11. et al. 2011 Considering that common shares have voting rights which translate to control. then the term "capital" shall include such preferred shares because the right to participate in the control or management of the corporation is exercised through the right to vote in the election of directors. Article XII of the Constitution refers only to shares of stock that can vote in the election of directors. two requisites must be proven.Industrial Refractories Corporation of the Philippines vs. 176579. Not all funds or assets received by the corporation can be considered paid-up capital for this term has a technical signification in Corporation Law. confusing or contrary to existing law. Article XII of the Constitution refers only to common shares. grossly contravenes the intent and letter of the Constitution that the “State shall develop a self-reliant and independent national economy effectively controlled by Filipinos. To construe broadly the term “capital” as the total outstanding capital stock. 390 SCRA 252 (2002) To fall within the prohibition of the law regarding the use of corporate name under Article 18 of the Corporation Code. and  the proposed name is either: (a) identical. Refractories Corporation of the Philippines (“RCP”) is confusingly similar with Industrial Refractories Corporation of the Philippines. subscribed and then actually paid up. Being the prior registrant. Such must form part of the authorized capital stock of the corporation. if the preferred shares also have the right to vote in the election of directors.G. Teves. including both common and nonvoting preferred shares.R. which necessarily equates to control of the public utility. or (c) patently deceptive. as opposed to preferred shares which usually have no voting rights. However. Gamboa v. National Wages and Productivity Commission. RCP has acquired the right to use the word “Refractories” as part of its corporate name. the assets transferred to and the loans extended to a corporation should not be considered in computing the paid-up capital of the corporation. Court of Appeals. MISCI-NACUSIP Local Chapter vs.

Gamboa vs. Goldstar Elevators Philippines 473 SCRA 705 ( 2005 ) The residence of the corporation is the place where the principal office is located as stated in the articles of incorporation even though the corporation has closed its office therein and relocated to another place. Hyatt Elevators and Escalators Corporation vs. Court of Appeals. vs. 276 SCRA 681 (1997) The legislative deliberations demonstrate that corporate dissolution for failure to file the by-laws on time was never the intention of the legislature. National Labor Relations Commission. at least 60 percent of the common shares and at least 60 percent of the preferred non-voting shares must be owned by Filipinos. at least 60 percent of such shares must necessarily be owned by Filipinos. Section 46 of the Corporation Code which provides that no by-laws shall be valid without SEC approval applies only to domestic corporations. Thus. a third party must have acquired knowledge of the pertinent by-laws at the time the transaction or agreement was entered into. if a corporation issues only a single class of shares. 270 SCRA 503 (1997) In order to be bound. Loyola Grand Villas Homeowners Association (South) Association. Of course. issues a mixture of common and preferred non-voting shares. preferred non-voting. In short. whether common.Heirs of Wilson P. The incorporators must be given the chance to explain their neglect or omission and to remedy the same. Teves. Inc. Court of Appeals. 277 SCRA 462 (1997) Since by-laws operate merely as internal rules among the stockholders. unless they have knowledge of the same. the 60-40 ownership requirement in favor of Filipino citizens must apply separately to each class of shares. they cannot affect or prejudice third persons who deal with the corporation. China Banking Corporation vs. Thus. A board resolution appointing an attorney-in-fact to represent the corporation in the pre-trial is not necessary where the by-laws authorizes an officer of the corporation to make such appointment xxx. 682 SCRA 397(2012) If a corporation is engaged in a partially nationalized industry. Where the SEC granted a license to a foreign corporation it is deemed to have approved its foreign enacted by-laws. a provision in the by-laws authorizing the chairman of the board of directors only to sign contracts will not affect the validity of the contract of a teacher who had no knowledge of it. . preferred voting or any other class of shares. PMI College vs. There can be no automatic corporate dissolution simply because the incorporators failed to abide by the required filing of by-laws. a provision in the by-laws of a country club granting it a preferred lien over the share of stock of a member for unpaid dues is not binding on the pledgee of the same share of stock if the latter had no actual knowledge of it.

homeowners association) must be elected from among the stockholders or members of the corporation. No. G. 518 SCRA 453 (2007) The determination of the necessity for additional offices and/or positions in a corporation. The Office of Vice President for Finance and Administration created by the President of the Corporation pursuant to the pertinent provision in the by-laws of the corporation was an ordinary. Sound principles of corporate management counsel against sharing sensitive information with a director whose fiduciary duty to loyalty may well require that he discloses this information to a competitive rival. and the court is without authority to substitute its judgment for that of the board. Coros . 13 October 2010 The Board of Directors of a corporation can not validly delegate the power to create a corporate office to the President. Matling Industrial and Commercial Corporation vs. the power to elect the corporate officers is a discretionary power that the law exclusively vested in the Board of Directors. and as long as it acts in good faith and in the exercise of honest judgment in the interest of the corporation. v.. the Board of Directors may create an executive committee or other board committees as part of its management prerogative provided that such committees do not function as an executive committee as contemplated by Section 35 of the Corporation Code. 89 SCRA 336 (1979) A corporation is authorized to prescribe the qualifications of its directors. not a corporate. Gokongwei vs. Go et al. Grace Christian High School vs. Similarly. The disqualification of a competition from being elected to the board of directors is a reasonable exercise of corporate authority. he should be given due process to show that he is not covered by the disqualification. Court of Appeals. in the light of Section 25 of the Corporation Code requiring the Board of Directors itself to elect the corporate officers. Inc.Filipinas Port Services. 157802. A director stands in fiduciary relation to the corporation and its stockholders. is a management prerogative which courts are wont to review in the absence of any proof that such prerogative was exercised in bad faith or with malice. provided. Securities Exchange Commission. office. Verily. in which case. Questions of policy or of management are left solely to the honest decision of the board as the business manager of the corporation. 281 SCRA 133 (1997) The board of directors of corporations (in this case. that before such nominee is disqualified. its orders are not reviewable by the courts. . if authorized under the by-laws. however. and can not be delegated to subordinate officers or agents. authority in the by-laws is required. A provision in the by-laws of the corporation that no person shall qualify or be eligible for nomination for elections to the board of directors if he is engaged in any business which competes with that of the Corporation is valid.R.

shall elect those who will fill in the vacancy created by the resignation of the hold-over board members. et al. The concept of permanent board representation violates the one-year term limit of the directors. Vs. Jesus V. more so when the articles of incorporation shows a significantly larger amount of shares issued and outstanding as compared to that listed in the stock and transfer book.Thus. Since the provision is contrary to law. When the stockholders representing at least a majority of the outstanding capital stock at a regular or special stockholders’ meeting agree to give it to them. Court of Appeals 454 SCRA 54 (2005) Quorum is based on the totality of the shares which have been subscribed and issued. 2009 The stockholders. Salas. The stock and transfer book cannot be used as the sole basis for determining the quorum as it does not reflect the totality of shares which have been subscribed. Court of Appeals. When there is a provision in the by-laws fixing their compensation. This is because in this case the ground for the vacancy is expiration of term of the holdover directors and not resignation. When they render services to the corporation in any capacity other than as directors . Valle Verde Country Club v. Western Institute of Technology. whether it be founders' shares or common shares. and completely disregarding the issued and outstanding shares as indicated in the articles of incorporation would work injustice to the owners and/or successors in interest of the said shares. is invalid. To base the computation of quorum solely on the obviously deficient. Inc. Lee vs. Africa. and not the directors. if not inaccurate stock and transfer book. September 4. he cannot be served with summons intended for the corporation. vs. only 14 members would be elected while the remaining member would be the representative of an educational institution located in the village of which the lot and home owners are member thereof. and 3. Since a director who executes a voting trust agreement over all his shares ceases to be a stockholder of record in the books of the corporation and ceases to be a director. 205 SCRA 752 (1992) Any director who ceases to be the owner of least one (1) share of the capital stock of the corporation of which he is a director shall thereby cease to be a director. 278 SCRA 216 (1997) Members of the board of directors may receive compensation in addition to reasonable per diems in the following cases : 1. Lanuza. the fact that for 15 years it has not been questioned cannot forestall a later challenge to its validity. 2. a provision in the amended by-laws of the corporation stating that of the fifteen members of its board of directors.

bad faith. G . A director is not personally liable for the debts of the corporation. (b) act in bad faith or with gross negligence in directing the corporate affairs. the officers of a corporation: (a) vote for or assent to patently unlawful acts of the corporation. Furthermore. 2013 Solidary liability will attach to the directors. When a director. such corporate officer cannot be made personally liable for corporate liabilities. and other persons. NLRC 520 SCRA 28 (2007) Article 212(e) does not state that corporate officers are personally liable for the unpaid salaries or separation pay of employees of the corporation. such as: 1. Balmaceda . or that the officer was guilty of gross negligence or bad faith. Carag v. the following requisites must concur: (1) the complainant must allege in the complaint that the director or officer assented to patently unlawful acts of the corporation. Alert Security and Investigation Agency. does not make a corporate officer personally liable for the debts of the corporation. however.R. and (2) the complainant must clearly and convincingly prove such unlawful acts. 182397 September 14. and (c) are guilty of conflict of interest to the prejudice of the corporation. Article 212(e) of the Labor Code. having knowledge thereof. 2011 In the absence of malice. its stockholders or members. which has a separate legal personality of its own. vs. Inc. trustee or officer has contractually agreed or stipulated to hold himself personally and solidarily liable with the corporation. 2. personally liable for his corporate action.Heirs of Fe Tan Uy vs. in appropriate cases. trustee or officer is made. by specific provision of law. No. officers or employees of the corporation in certain circumstances. Before a director or officer of a corporation can be held personally liable for corporate obligations. The liability of corporate officers for corporate debts remains governed by Section 31 of the Corporation Code. negligence or bad faith. When a director or officer has consented to the issuance of watered stocks or who. or 4. International Exchange Bank Feb 13. or a specific provision of law making a corporate officer liable. When directors and trustees or. did not forthwith file with the corporate secretary his written objection 3. The governing law on personal liability of directors for debts of the corporation is still Section 31 of the Corporation Code. A director is personally liable for corporate debts only if he wilfully and knowingly votes for or assents to patently unlawful acts of the corporation or he is guilty of gross . Thus. When a director. by itself. the President of the corporation can not be held personally liable if the complaint merely averred that he signed as a surety to secure the obligation of the corporation and which surety turned out to be spurious.

a ) Chairperson of the Board of Directors.negligence or bad faith in directing the affairs of the corporation. However. 363 SCRA 307 (2001) The rule pertaining to transactions between corporations with interlocking directors resulting in prejudice to one of the corporations does not apply where the corporation allegedly prejudiced is a third party. Moreover. not one of the corporations with interlocking directors. 576 SCRA 463 (2009) The lawyer who signed the pleading. c ) General Manager. e ) Employment Specialist in labor case. These officers are in the position to verify the truthfulness and correctness of the allegations in the petition. Maranaw Hotels and Resort Corporation v.R. Court of Appeals. and thus pierce the veil of corporate fiction. G. the unpaid seller of the debtor can not complain that the assignment is invalid simply because the mortgagee and the assignee have interlocking directors. Planters Products Inc. bad faith does not automatically arise just because a corporation fails to comply with the notice requirement of labor laws on company closure or dismissal of employees. 13 June 2012 The execution of a document by a bank manager called “ pagares “ which guaranteed purchases on credit by a client is contrary to the General Banking law which prohibits bank officers from guaranteeing loans of bank clients. 179015. There must be a law declaring the act unlawful and penalizing the act. The failure to give notice is not an unlawful act because the law does not define such failure as unlawful. GR No. United Coconut Planters Bank vs. Bad faith is never presumed.. the bad faith or wrongdoing of the director must be established clearly and convincingly. b ) President. Such failure to give notice is a violation of procedural due process but does not amount to an unlawful or criminal act. 2010 The following officers may sign the verification and certification against nonforum shopping on behalf of the corporation even in the absence of board resolution. February 4. Thus. Tablante. Court of Appeals. verification and certification against nonforum shopping must be specifically authorized by the Board of Directors of the Corporation to make his actions binding on his principal. Patently unlawful acts are those declared unlawful by law which imposes penalties for commission of such unlawful acts. . when a mortgagee bank foreclosed the mortgage on the real and personal property of the debtor and thereafter assigned the properties to a corporation it formed to manage the foreclosed assets. 162924. Development Bank of the Philippines vs. to hold a director personally liable for debts of the corporation. d ) Personnel Officer. No. Mid Pasig Land and Development Corporation v.

the third person has little or no information as to what occurs in corporate meetings. Undoubtedly. Its existence may be ascertained through 1) the general manner in which the corporation holds out an officer or agent as having the power to act. or any other agent. the apparent authority to act in general. has clearly clothed its manager with apparent authority to sell an acquired asset in the normal course of business. to sell corporate property thus and it had clothed him with apparent authority to modify the same via the second letter-agreement. It has a duty to perform necessary and lawful acts to enable the other parties to enjoy all the benefits of the contract which it had authorized. the bank had previously allowed its in-house counsel to enter into the first agreement without a board resolution expressly authorizing him. Naturally. Apparent authority is derived not merely from practice. but the vesting of a corporate officer with the power to bind the corporation. with actual or constructive knowledge thereof. with which it clothes him. wherein the power was exercised without any objection from its board or shareholders. What transpires in the corporate board room is entirely an internal matter. Westmont Bank vs. however. it will be estopped from denying such officer's authority. the authority to act for and to bind a corporation may be presumed from acts of recognition in other instances. or in other words. The doctrine of “apparent authority. If a corporation. by its acts and omission. in the absence of authority from the board of directors. Sps. not even its officers.” had long been recognized in this jurisdiction. It is not the quantity of similar acts which establishes apparent authority. Thus. consciously lets one of its officers. no person. Rafael and Monaliza Pronstroller 558 SCRA 113 (2008). In this case. and he must necessarily rely upon the external manifestations of corporate consent. can validly bind a corporation. Accordingly. it is incumbent upon the Bank to show that its account officer is not authorized to transact for the corporation. The integrity of commercial transactions can only be maintained by holding the corporation strictly to the liability fixed upon it by its agents in accordance with law. it is legally obliged to confirm the transaction by issuing a board resolution to enable the buyers to register the property in their names. Ocfemia. to act within the scope of an apparent authority. within or beyond the scope of his ordinary powers.Rural Bank of Milaor vs. Inland Construction and Development Corporation 582 SCRA 230 (2009) The general rule remains that. or 2) the acquiescence in his acts of a particular nature. . the corporation is bound by the acts entered into by its in-house counsel even though he was subsequently relieved of the position. it is presumed that the latter had authority to sign for the bank in the Deed of Assignment. Where the Bank conducted business through its Account Officer. 325 SCRA 99 When a bank. Associated Bank vs.

July 13. the corporation’s vigorous denial that any agreement to release the mortgage was ever entered into by it. and. Pena vs. Cebu). 180 SCRA 130 (1989) A corporation cannot enter into a partnership contract but my engage in a joint venture with other. Thus. No. the complaint should be treated as a violation of the corporate franchise. 356 SCRA 193 (2001) When the thrust of a complaint in on the ultra vires act of a corporation. within his field and as to third persons. when the corporation engaged in pawnbroking even though its articles if incorporation does not allow it. Inc. 193 SCRA 717 (1991) . Being a mere branch manager alone is insufficient to support the conclusion that he has been clothed with “apparent authority” to verbally alter terms of written contracts. that the complained act of a corporation is contrary to its declared corporate purposes. Securities and Exchange Commission. the SEC has jurisdiction to entertain the complaint before it. 2010 There would be an undue stretching of the doctrine of apparent authority were we to consider the power to undo or nullify solemn agreements validly entered into as within the doctrine’s ambit. Inc. since this is reasonably necessary for the operation and maintenance of its power plant.. with apparent authority commensurate with the ordinary business entrusted him and the usual course and conduct thereof. G. Vera. National power Corporations vs. Sanitary Wares Manufacturing Corporation. A corporation (NAPOCOR) formed for the purpose of generating electrical power can undertake stevedoring services to unload coal into its pier to be brought to and fuel its power plant. 170 SCRA 721 (1989) A corporation is not restricted to the exercise of powers expressly conferred upon it by its charter but has the power to do what is reasonably necessary or proper to promote the interest or welfare of the corporation. vs. is the general agent and is in general charge of the corporation. that is. Although a branch manager. Aurbach vs. Court of Appeals. yet the power to modify or nullify corporate contracts remains generally in the board of directors.R. With more reason that we cannot sustain the submission of the petitioner that a declaration by the Central Bank that it violated PD 114 (law on pawnshop) is a condition precedent before the SEC can take cognizance of the complaint against the petitioner. Philippine Countryside Rural Bank (Liloan. the fact that the purported agreement was not even reduced into writing considering its legal effects on the parties’ interests. Pilipinas Loan Company. especially when viewed against the telling circumstances of this case: the unequivocal provision in the mortgage contract.Banate vs. The jurisdiction of the SEC is not affected even if the authority to operate a certain specialized activity is withdrawn by the appropriate regulatory body other than the SEC. 163825.

November 24. the articled of incorporation or by-laws may fix a greater number than the majority of the number of directors to constitute a quorum. The signature of the corporate secretary gives the minutes of the meeting probative value and credibility. minutes and official records of a corporation is usually the corporate secretary. The collection suit filed by the dissenting stockholder to enforce payment of the fair value of his shares is premature if at the time of demand for payment. the corporate secretary has the duty to record and prepare the minutes of the meeting. the entries contained in the minutes are prima facie evidence of what actually took place during the meeting. 2010 In order to give rise to any obligation to pay on the part of the corporation. The proper custodian of the books. Any number less than the number provided in the articles or by-laws cannot constitute a quorum. . There is no provision in the Corporation Code of the Philippines that requires that the minutes of the meeting should be signed by all the members of the board. the dissenting stockholder should first make a valid demand that the corporation refused to pay despite having unrestricted retained earnings. in addition to a proper board resolution. the corporation could not be said to be guilty of any actionable omission that could sustain the action to collect. No. the corporation had no surplus profit. Turner vs.R. Being the custodian of corporate records.Where the remaining asset of a corporation was right to redeem parcels of land that were foreclosed. G. Hermenegildo Dumlao and Emilio La’o 580 SCRA (2009). Otherwise. In a criminal case involving a lease-purchase agreement allegedly disadvantageous to the government. the assignment of the right to redeem requires. the affirmative votes of the stockholders representing at least 2/3s of the outstanding capital stock. The non-signing by the majority of the members of the Board of Trustees of the said minutes does not necessarily mean that the supposed resolution was not approved by the Board. all that the attending directors could do is to adjourn. the Sandiganbayan erred in concluding that there was no such agreement entered into and thus negating criminal liability since only three members out of seven signed the minutes of the meeting. Moreover. There having been no stockholders’ approval. The fact that the Corporation subsequent to the demand for payment and during the pendency of the collection case posted surplus profit did not cure the prematurity of the cause of action. 157479. Three out of five directors of the board of directors present in a special meeting do not constitute a quorum to validly transact business when its by-laws requires at least four members to constitute a quorum. any act therein would not bind the corporation. the redemption made by the assignee is invalid. People of the Philippines vs. Lorenzo Shipping Corporation. Under Section 25 of the Corporation Code. The signing of the minutes by all the members of the board is not required.

170783. G. Lim vs. Securities and Exchange Commission 89 SCRA 386 ( 1979 ) It would be more in accord with equity. No. Muer. 561 SCRA 593 ( 2008 ) The bare claim that the complaint is a derivative suit will not suffice to confer jurisdiction on the RTC as a special commercial court if the stockholder can not comply with the requisites for the existence of a derivative suit which are : a ) the party bringing suit should be a stockholder during the act or transaction complained of. Hon. RTC of Makati Branch 142. and c ) the cause of action devolves upon the corporation. the wrongdoing or harm having been caused to the corporation and not to the particular stockholder bringing the suit. June 18. 354 SCRA 207 ( 2001 ) Personal injury suffered by the stockholders can not disqualify them from filing a derivative suit on behalf of the corporation. Lim Y. good faith and fair dealing to construe the statutory right of the stockholder to inspect the books and records of the corporation as extending to books and records of its wholly-owned subsidiary which are in the former’s possession and control. Yukayguan. Young. Reyes vs. The fact that the corporation involved is a family corporation should not in any way exempt the suing stockholder from the requirements and formalities for filing a derivative suit. Goachan vs.R.Gokongwei vs. vs. 2012 . by-laws. It merely gives rise to an additional cause of action for damages against the erring directors. The allegation that the suing stockholder talked to the other stockholder regarding the dispute hardly constitutes “ all reasonable efforts to exhaust all remedies available “. the number of shares not being material. Yu vs. The complaint should also allege the fact that there was no appraisal right available under for the acts complained of and that the suit was not a nuisance or harassment suit. b ) the party has tried to exhaust intra-corporate remedies. Legaspi Towers 300. laws or rules governing the corporation to obtain the relief he desires and to allege such fact with particularity in the complaint. 588 SCRA 589 ( 2009 ) The stockholder filing a derivative suit should have exerted all reasonable efforts to exhaust all remedies available under the articles of incorporation. 352 SCRA 216 ( 2001 ) A suit to enforce pre-emptive right in a corporation is not a derivative suit because it was not filed for the benefit of the corporation.

SEC rules and even the Rules of Court provide for appropriate and adequate intra-corporate remedies. and 3 ) dissolution and eventual liquidation of the corporation. especially if the party asking for it has no legal personality to do so and the requirements of the law have not been met. Since these were unissued shares. to demand rescission of his subscription and call for the distribution of some part of the . although one subscriber was adversely affected by the actions of the other shareholder. the derivative suit filed by petitioners in behalf of the condominium corporation in the Second Amended Complaint is improper. 2 ) purchase of redeemable shares by the corporation regardless of the existence of unrestricted retained earnings. notwithstanding the fact the parties refer to it as a purchase or some other contract. which did not have the right to vote. the agreement cannot be rescinded since subject matter of the contract was the unissued shares of the Corporation allocated to the subscriber. When a subscriber assigned properties and infused capital to the corporation upon invitation of a majority stockholder and in exchange for shares of stock under a pre-subscription agreement. Thus. who wield such right to vote. the subscription contract was one between the subscriber and the corporation and not between the stockholders. the PreSubscription Agreement was in fact a subscription contract as defined under Section 60. A contrary doctrine will tread on dangerous ground because it will allow just any stockholder. against respondents. the complaint for nullification of the election is a direct action by petitioners.” A subscription contract necessarily involves the corporation as one of the contracting parties since the subject matter of the transaction is property owned by the corporation – its shares of shock. the doctrine is articulated in Section 41 of the Corporation Code on the power of the corporation to acquire its own shares and in Section 122 on the prohibition against the distribution of corporate assets and property unless the stringent requirements are complied with. whose rights to vote and to be voted upon were directly affected by the election of the new set of board of directors. Under the circumstances. Ong vs Tiu 401 SCRA 1 ( 2003 ) The trust fund doctrine provides that subscriptions to the capital stock of a corporation constitute a fund to which the creditors have a right to look for the satisfaction of their claims. Title VII of the Corporation Code: “Any contract for the acquisition of unissued stock in an existing corporation or a corporation still to be formed shall be deemed a subscription within the meaning of this Title. who are the newly-elected Board of Directors. who were the members of the Board of Directors of the corporation before the election. who pushed through with the election even if petitioners had adjourned the meeting allegedly due to lack of quorum. Hence. The cause of action devolves on petitioners. Also.Petitioners seek the nullification of the election of the Board of Directors for the years 2004-2005. The Corporation Code. Petitioners are the injured party. This doctrine is the underlying principle in the procedure for the distribution of corporate capital only in three instances : 1 ) amendment of articles of incorporation to reduce the authorized capital stock. composed of herein respondents. other than rescission. not the condominium corporation. rescission due to breach of contract is the wrong remedy for personal grievances. The party-in-interest are the petitioners as stockholders. Rescission is certainly not one of them. Furthermore. for just about any real or imaged offense.

No majority vote of the board of directors was ever taken. Ponce vs. the number of certificate or certificates and the number of shares transferred. the certificate must be properly indorsed and that title to such certificate of stock is vested in the transferee by the delivery of the duly indorsed certificate of stock. xxx “Interest bearing stocks.corporate assets to him without complying with the requirements of the Corporation Code. Rescission cannot also be deemed as a petition to decrease capital stock because such action never complied with the formal requirements for decrease of capital stock under Section 38 of the Corporation Code. Republic Planters Bank vs. 393. Alsons Cement Corporation. is legal only when construed as requiring payment of interest as dividends from net earnings or surplus only. Said provision of law strictly requires the recording of the transfer in the books of the corporation and not elsewhere. The allegation that it was delivered to him by the stockholder because he was the one who paid for it does not hold. until the transfer is recorded in the books of the corporation showing the names of the parties to the transaction. 323 SCRA 424 (2000) Section 63 of the Corporation Code provides that no transfer shall be valid except as between the parties. 207 SCRA 234 (1992) In order for a transfer of stock certificate to be effective. The unrecorded transfer of a propriety ownership certificate is not valid as against the judgment creditor of the transferor who can therefore levy the shares pursuant to a judgment despite the unrecorded transfer. Without such recording. Jomouad. Garcia vs. Intermediate Appellate Court. Razon vs. SCRA 602 (2002) Pursuant to Section 63 of the Corporation Code. Agana. the stockholder of record should be considered the owner of the shares since he did not indorse the certificate in favor of the incorporator. Neither was there any stockholders meeting at which the approval of stockholders owning at least two-thirds of the outstanding capital stock was secured.” on which the corporation agrees absolutely to pay interest before dividends are paid to common stockholders. the transferee may not . the date of the transfer. 296 SCRA 1 (1998) Dividends cannot be declared for preferred shares which were guaranteed a quarterly dividend if there are no unrestricted retained earnings. Thus. a transfer of shares of stocks not recorded in the stock and transfer book of the corporation is non-existent as far as the corporation is concerned. to be valid as against third parties. where an incorporator organized a corporation and certain number of shares was issued to a stockholder but the certificate of stock covering said shares was in the possession of the incorporator who refused to deliver the same to the heir of the stockholder after the latter died.

But the transferor. Willkom. 11 October 2010 Even if it is true that the Monetary Board of the Central Bank of the Philippines recognized the merger of two banks. for then he would be entitled to the remedy of mandamus. . 2009 Upon the death of the stockholder. A corporate secretary may not be compelled to register transfer of shares on the basis merely of an indorsement of stock certificates. 178618.R. Puno v. By operation of law. It has been made clear that before a transferee may ask for the issuance of stock certificates. Torres vs. The issuance of the certificate of merger is crucial because not only does it bear out SEC’s approval but it also marks the moment when the consequences of a merger take place. 278 SCRA 793 ( 1997 ) It is the corporate secretary’s duty and obligation to register valid transfers of stocks and if said corporate officer refuses to comply. the transferor-stockholder may rightfully bring suit to compel performance. No. The heirs acquire standing in the corporation only upon registration of the transfer of the ownership of the shares in the books of the corporation. With more reason a corporate secretary may not be compelled to issue stock certificates without such registration. his heirs do not automatically become the stockholders of the corporation. upon the effectivity of the merger. even though he may be the controlling stockholder of the corporation can not take the law into his own hands and cause himself the recording of the transfers of the qualifying shares to his nominee-directors in the stock and transfer book of the corporation. Puno Enterprises. the absorbed corporation ceases to exist but its rights and properties. as well as liabilities.be regarded by the corporation as one among its stockholders and the corporation may legally refuse the issuance of stock certificates in the name of the transferee even when there has been compliance with the requirements of Section 64 of the Corporation Code. shall be taken and deemed transferred to and vested in the surviving corporation. Mindanao Savings and Loan Association vs. The situation would be different if the petitioner was himself the registered owner of the stock which he sought to transfer to a third party. Court of Appeals. September 11. G. the merger is still incomplete without the certificate of merger duly issued by the SEC. he must first cause the registration of the transfer and thereby enjoy the status of a stockholder insofar as the corporation is concerned.

Associated Bank vs. G. Naguiat vs. 269 SCRA 564 ( 1997 ) Stockholders who are actively involved in the management or operation of the business and affairs of a close corporation shall be personally liable for corporate . regardless of the date of execution. by itself. as well as their liabilities. one of the combining corporations survives and continues the business while the rest are dissolved and all their rights.R. a narrow distribution of ownership does not . So too. should be deemed to refer only to property rights and obligations and do not include the employment contracts of its personnel. Assets and liabilities. make a close corporation. No. 291 SCRA 511 In the merger of two or more existing corporations. Court of Appeals. shall pertain to the surviving corporation.86% of its subscribed capital stock. if the surviving corporation as an employer had the right to choose who to retain among the employees of the absorbed corporation. 296 SCRA 63 A corporation does not become a close corporation just because a man and his wife own 98. NB On motion for reconsideration. Certainly. BPI Employees Union – Davao Chapter. San Juan Steel Fabricators vs. 2011 It is contrary to public policy to declare the former employees of the absorbed corporation as forming part of its assets or liabilities that were transferred to and absorbed by the surviving corporation in the Articles of Merger. there is no winding up of their affairs or liquidation of their assets because the surviving corporation automatically acquires all their rights. properties and liabilities are acquired by the surviving corporation. The features of a close corporation under the Corporation Code must be embodied in the articles of incorporation. 164301. the SC held that it is more in keeping with social justice to consider the employees of the absorbed corporation the employees of the surviving corporation even in the absence of a provision in the articles of merger. they had a choice whether or not they would allow themselves to be absorbed by the surviving corporation. privileges and powers.Bank of the Philippine Islands v. A corporation cannot unilaterally transfer its employees to another employer like chattel. Court of Appeals. All contracts of the absorbed corporations. Although there is dissolution of the absorbed corporations. National Labor Relations Commission. in this instance. Certainly nothing prevented the employees of the absorbed corporation from resigning or retiring and seeking employment elsewhere instead of going along with the proposed absorption. Even though the employees of the absorbed corporation had no choice or control over the merger of their employer. the latter employees had the concomitant right to choose not to be absorbed by the corporation. October 19.

2011 Although Sec. 168008. Rural Bank of Canaman . vs. Neither does it change or terminate existing causes of action. second paragraph thereof sets the term of the members of the Board of Trustees of non-stock educational corporation at five years.G. which arose because of the corporate ties between the parties. The dissolution does not automatically convert the parties into total strangers or change their intra-corporate relationships. Sec. at the time of petitioner’s removal. are accorded protection by law pursuant to Sec. August 17. the rights of a corporation. Ordonez Corp. FQB +7. No. 176260. The dissolution of the corporation simply prohibits it from continuing its business. GR No.“ Paramount Insurance Corp. despite such dissolution. the parties involved in the litigation are still corporate actors. and could be removed at any time. G. Thus. No.R. Thus. without cause. 108 of the Corporation Code. Dissolution or even the expiration of the three-year liquidation period should not be a bar to a corporation’s enforcement of its rights as a corporation. 145 of the Corporation Code. an existing intra-corporate dispute. which does not constitute a continuation of corporate business. Thus. Adventist University of the Philippines. he was already occupying the office in a holdover capacity. An action to correct Pursuant to Section 145 of the Corporation Code. Barrameda v. 122 of the Corporation Code. Barayuga v. However. Aguirre vs. Inc. Inc. 170770. which is dissolved pending litigation. January 9 2013. Moreover. A. it likewise contains a proviso expressly subjecting the duration to what is otherwise provided in the articles of incorporation or by-laws of the corporation.C. a cause of action involving an intracorporate controversy remains and must be filed as an intra-corporate dispute despite the subsequent dissolution of the corporation.R. corporations whose certificate of registration was revoked by the SEC may still maintain actions in court for the protection of its rights which includes the right to appeal. 561 SCRA 327 (2008) Although the cancellation of a corporation’s certificate of registration puts an end to its juridical personality. however provides that a corporation whose corporate existence is terminated in any manner continues to be a body corporate for three years after its dissolution for purposes of prosecuting and defending suits by and against it and to enable it to settle and close its affairs. That contrary provision controls on the term of office..torts ( such as failure to pay separation benefits of employees terminated for authorized causes ) unless the corporation has obtained adequate liability insurance coverage. is not affected by the subsequent dissolution of the corporation. 24 November 2010 To allow a creditor’s case to proceed independently of the liquidation case. upon the election or appointment of his successor. a possibility of favorable judgment and execution thereof against the assets of the .

Design International Selections. 171995. chiefly in cases where such person has received the benefits of the contract. the latter can not be considered doing business. Global Business Holdings. The principle is applied to prevent a person contracting with a foreign corporation from later taking advantage of its noncompliance with the statutes. October 13. SteelCase vs. 2010 A foreign corporation doing business in the Philippines without license may sue in Philippine courts a Filipino citizen or a Philippine entity that had contracted with and benefited from it.distressed corporation would not only prejudice the other creditors and depositors but would defeat the very purpose for which a liquidation court was constituted as well. Vs. 168266. Cargill.R. G. April 18. Inc. A party is estopped from challenging the personality of a corporation after having acknowledged the same by entering into a contract with it. . If the distributor is an independent entity which buys and distributes products. March 15. for its own name and its own account. is not doing business in the Philippines. 2010 A foreign company that merely imports goods from a Philippine exporter. vs. without opening an office or appointing an agent in the Philippines.V. 173463. other than those of the foreign corporation. 2012 The appointment of a distributor in the Philippine is not sufficient to constitute doing business unless it is under the full control of the foreign corporation. Surecomp Software B. G.. Inc. GR no.R. No. No. Intra Strata Assurance Corporation.

interest in real estate.II. 664 SCRA 28(2012) For an investment contract to exist. like San Miguel Corporation (SMC). (4) expectation of profits. When an investor buys these papers or securities.A. to sustain the SEC position in this case. transaction. Prosperity. Thus. earning commissions from purchases made by new buyers whom he refers to the person who sold the product to him. in SMC with an expectation of profits arising from the efforts of those who manage and operate that company.000. 8799) Gabioza vs. or scheme. An example that comes to mind would be the long-term commercial papers that large companies. (2) an investment of money. Securities Regulation Code (R. offer to the public for raising funds that it needs for expansion.No. referred to as the Howey test must concur: (1) a contract. Inc. and (5) profits arising primarily from the efforts of others. it is one thing for the corporation to issue checks to satisfy isolated obligations and another for a corporation to execute an elaborate scheme where it would comport itself to the public as a pseudo-investment house and issue post-dated checks instead of stocks or traditional securities to evidence the investments of its patrons.. Timeshare Realty Corporation vs Cesar Lao 544 SCRA 254 ( 2008 ) A corporation is absolutely proscribed in selling and distributing unregistered timeshare certificates unless it complies with the registration requirements under the Securities Regulation Code. SMC has to register these commercial papers with the SEC before offering them to investors.00 are incentives .Com. Securities and Exchange Commission vs. together with others. PCI’s scheme or contract with its buyers must have all these elements. and insurance coverage worth P50. he invests his money. a scheme adopted by companies for getting people to buy their products outside the usual retail system where products are bought from the store’s shelf and where the buyer can become a down-line seller. Court of Appeals 565 SCRA 38 ( 2008 ) While the issuance of checks for the purpose of securing a loan to finance the activities of the corporation is well within the ambit of a valid corporate act. the following elements. Network marketing. (3) investment is made in a common enterprise. is not an investment contract. The commissions.

are considered a public company.R. in her capacity Director of the Corporation Finance Department of the Securities and Exchange Commission and/or the Securities and Exchange Commission. Cemco Holdings vs. 2011 A “public company. 585 SCRA 679 The solicitation of proxies must be in accordance with rules and regulations issued by the SEC. Whatever may be the method by which control of a public company is obtained either through the direct purchase of its stocks or through indirect means. 544 SCRA 540 ( 2008 ) The SEC has the power to recall and cancel a stock and transfer book which was erroneously registered. GSIS vs. 17. 529 SCRA 355 ( 2007 ) The coverage of the tender offer rule covers not only direct acquisition but also indirect acquisition or any type of acquisition. The power of the SEC to investigate violations of its rules on proxy solicitation is unquestioned when proxies are obtained to voted on matters unrelated to the cases enumerated under Section 5 of PD 902-A. that is: “any corporation with a class of equity securities listed on an Exchange or with assets in excess of Fifty Million Pesos (P50. National Life Insurance Company . Provident International Resources Corporation vs Venus. provided they meet the requirements provided for under Subsec. Philippine Veterans Bank v.000. at least two hundred (200) of which are holding at least one hundred (100) shares of a class of its equity securities. 191995. However. mandatory tender offer rule applies. These can hardly be regarded as profits from investment of money under the Howey test. even companies whose shares are offered only to a specific group of people. the resulting controversy.” .to down-line sellers to bring in other customers. when proxies are solicited in relation to the election of corporate directors.” as contemplated by the SRC is not limited to a company whose shares of stock are publicly listed. Court of Appeals. No. August 3. should be properly seen as an election controversy within the jurisdiction of the RTC special commercial court.000.2 of the SRC. G.00) and having two hundred (200) or more holders. Callangan. even if it ostensibly raised the violation of the SEC rules on proxy solicitation.

or any rule of an Exchange.3.1. or (3) upon verified complaint by any aggrieved party. allocated by Section 5(i) of the SRC.” The maximum duration of the CDO issued under Section 53. “will operate as a fraud on investors or is otherwise likely to cause grave or irreparable injury or prejudice to the investing public”.1. (2) motu proprio. While the SEC has jurisdiction to order the dissolution of a corporation. At the same time." G. and determine their preferences. involves a determination by the SEC that “any person has engaged or is about to engage in any act or practice constituting a violation of any provision of this Code. While no lifetime is expressly specified for the CDO under Section 64. as successor-in-interest of Far East Bank and Trust Company. 2012 The RTC may take cognizance of the injunction suit. The first. the respondent to the CDO may file a formal request for the lifting thereof. while the CDO under Section 64.3 is ten (10) days.” The provision additionally requires a finding that “there is a reasonable likelihood of continuing [or engaging in] further or future violations by such person. it remains . which unless restrained. language absent in Section 5(i). GSIS vs. No.1 plainly provides three segregate instances upon which the SEC may issue the CDO under this provision: (1) after proper investigation or verification. Section 64. v. Notwithstanding the similarities between Section 5(i) and Section 64. found in Section 53. which the SEC must hear within fifteen (15) days from filing and decide within ten (10) days from the hearing. February 15. The second basis. Eduardo Hong.Bank of the Philippine Islands . registered securities association. No other requisite or detail is tied to this CDO authorized under Section 5(i). clearing agency or other self-regulatory organization. which clearly falls under the jurisdiction of the regular courts. Court of Appeals 585 SCRA 679 (2009 ) There are three distinct bases for the issuance by the SEC of the cease and desist order ( CDO ). 161771. no mention is made whether the CDO defined under Section 5(i) may be issued ex-parte. SEC’s jurisdiction does not extend to the liquidation of a corporation. is predicated on a necessity “to prevent fraud or injury to the investing public”. The trial court is in the best position to convene all the creditors of the corporation. Both require a common finding of a need to prevent fraud or injury to the investing public. regulation or order thereunder. The third basis for the issuance of a CDO is Section 64.R. This CDO is founded on a determination of an act or practice. doing business under the name and style "SUPER LINE PRINTING PRESS. It appears that the CDO under Section 5(i) is similar to the CDO under Section 64. This is the correct procedure because the liquidation of a corporation requires the settlement of claims for and against the corporation.1 requires “grave and irreparable” injury. jurisdiction over the liquidation of the corporation now pertains to the appropriate regional trial courts. any rule. ascertain their claims.

Also. and (2) that there is a reasonable likelihood of continuing. the SEC must adjudge that the act. Yukayguan. may be issued “ex-parte” (under Section 53. . In the case of Section 53. Coros .3 is a distinct creation from that under Section 64. The office of Vice President for Finance and Administration created by the President of the Corporation pursuant to the pertinent provision in the by-laws of the corporation was an ordinary.clear that the CDO issued under Section 53.1.R. the CDO under Section 53. The CDO as contemplated in Section 53.3. 13 October 2010 The Board of Directors of a corporation can not validly delegate the power to create a corporate office to the President. In the case of Section 64.” A singular CDO could not be founded on Section 5.3 and Section 64 collectively.1). not a corporate. the power to elect the corporate officers is a discretionary power that the law exclusively vested in the Board of Directors. will operate as a fraud on investors or is otherwise likely to cause grave or irreparable injury or prejudice to the investing public.The SEC is a collegial body composed of a Chairperson and four (4) Commissioners. G. Verily. by only by one commissioner likewise renders the order fatally infirm. No. there are identifiable requisite actions on the part of the SEC that must be undertaken before the CDO may be issued either under Section 53. Nothing in these provisions impose a requisite hearing before the CDO may be issued thereunder. the SEC must make two findings: (1) that such person has engaged in any such act or practice. Yu vs. Section 53. At the very least.3 or Section 64. 588 SCRA 589 ( 2009 ) The stockholder filing a derivative suit should have exerted all reasonable efforts to exhaust all remedies available under the articles of incorporation. (or engaging in) further or future violations by such person. Nonetheless. It is an error on the part of the SEC in granting the CDO without stating which kind of CDO as it is an act that contravenes due process of law. 157802. the fact that the CDO was signed.3 and under Section 64 have their respective requisites and terms.3) or “without necessity of hearing” (under Section 64. the presence of at least three (3) Commissioners is required. in the light of Section 25 of the Corporation Code requiring the Board of Directors itself to elect the corporate officers. In order to constitute a quorum to conduct business. and can not be delegated to subordinate officers or agents. office. unless restrained. much less apparently deliberated upon.3 or in Section 64. by-laws. Matling Industrial and Commercial Corporation vs.

Legaspi Towers 300. who wield such right to vote. The party-in-interest are the petitioners as stockholders. The allegation that the suing stockholder talked to the other stockholder regarding the dispute hardly constitutes “ all reasonable efforts to exhaust all remedies available “. The propriety and legality of the sale of the condominium unit is different from the propriety and legality of the unpaid assessment dues. 143264.. the derivative suit filed by petitioners in behalf of the condominium corporation in the Second Amended Complaint is improper. Inc. The latter partakes of the nature of an intra-corporate dispute. 2012. Banco De Oro G.laws or rules governing the corporation to obtain the relief he desires and to allege such fact with particularity in the complaint. 186271. To include said buyer as a party-defendant in the case pending with the SEC would violate the then existing rule on jurisdiction over intra-corporate disputes. 170783. the complaint for nullification of the election is a direct action by petitioners. et. The fact that the corporation involved is a family corporation should not in any way exempt the suing stockholder from the requirements and formalities for filing a derivative suit. which did not have the right to vote.. hence. G. February 23. composed of herein respondents. Muer. Chateau De Baie Condominium Corporation vs. the completion of the sale does not bar the condominium unit owner from questioning the amount of the unpaid dues that gave rise to the foreclosure and to the subsequent sale of the property. No.R. April 23. The Court held that the complaint for annulment of sale was properly filed with the regular court. Lisam Enterprises vs. because the buyer of the property had no intra-corporate relationship with the stockholders. Under the circumstances. who were the members of the Board of Directors of the corporation before the election. 2011 Although the extrajudicial sale of the condominium unit ( for non-payment of condominium dues and assessment ) has been fully effected and that the petition of the owner questioning the sale has been dismissed with finality. against respondents. June 18. whose rights to vote and to be voted upon were directly affected by the election of the new set of board of directors. No. Hence. The complaint should also allege the fact that there was no appraisal right available under for the acts complained of and that the suit was not a nuisance or harassment suit. Petitioners are the injured party. 2012. not the condominium corporation. who are the newly-elected Board of Directors. GR No. Petitioners seek the nullification of the election of the Board of Directors for the years 2004-2005. The cause of action devolves on petitioners. the buyer could not be joined as partydefendant in the SEC case. who pushed through with the election even if petitioners had adjourned the meeting allegedly due to lack of quorum. . Spouses Moreno. al.R.vs.

The enabling clause in the corporation’s by-laws empowering its Board of Directors to create additional officers. The act of fraud or misrepresentation complained of becomes a criterion in determining whether the complaint on its face has merits.R. The Board of Directors has no power to create other corporate offices without first amending the corporate bylaws so as to include therein the newly created corporate office. General Manager and the alleged subsequent passage of a board resolution to that effect can not make such position a corporate office. Vs valley golf and clemente.e. 189486. 2011 Respondent was not a corporate officer of the corporation because his position as General Manager was not specifically mentioned in the roster of corporate officers in its corporate by-laws. 194024. or members of any corporation. or any act of. officers or partners. the failure to specifically allege the fraudulent acts does not constitute a ground for dismissal since such a defect can be cured by a bill of particulars.SECOND SALE is different case and may proceed despite the finality of decision affirming legality of sale. Go vs. No. Guy. the persons occupying such positions can not be viewed as corporate officers under Section 25 of the Corporation Code. 2012 In ordinary cases. The above-stated rule. the board of directors. GR No. Condominuium may be sold against non payment as long master deed of restriction allows. . for the complaint to show on its face what are claimed to be the fraudulent corporate acts if the complainant wishes to invoke the court’s special commercial jurisdiction.. It is essential.” This is because fraud in intra-corporate controversies must be based on “devises and schemes employed by. or association. Distinction Properties Development Corporation. partners. does not apply to intra-corporate controversies. Thus. December 12. however.September 5. partnership. must partake pledge and chattle mortgage March II Marketing vs Joson. business associates. Guy vs. shares cannot be sold even bylaws alllwe. April 25. or within the jurisdiction of special commercial court. therefore. 2012 A complaint filed by condominium unit owners against the developer of the condominium for unsound business practice and violation of the Master Deed and Declaration of Restrictions in that the developer committed misrepresentations in its circulated flyers and brochures as to the facilities and amenities that would be available in the corporation is an intra-corporate controversy. In cases governed by the Interim Rules of Procedure on IntraCorporate Controversies a bill of particulars is a prohibited pleading. or merely a nuisance suit. the mere averment of fraud in the transfer of shares of stock but without indicating in the complaint the specific acts constituting of fraud is not sufficient to make the complaint within the ambit of intra-corporate controversy. amounting to fraud or misrepresentation which may be detrimental to the interest of the public and/or of the stockholders. G. Though the Board may create appointive positions other than the positions of corporate officers. i. 171993. GR no.

Hence. courts will not determine a controversy involving a question within the jurisdiction of the administrative tribunal. the mere existence of an intra-corporate relationship does not always give rise to an intracorporate controversy. .R. The Securities Regulation Code is a special law. as well as the internal and intra-corporate regulatory rules of the corporation. G. Under the controversy test. 175301. all complaints for any violation of the Code and its implementing rules and regulations should be filed with SEC. These are essentially determined through the allegations in the complaint which determine the nature of the action. Baviera vs. where the question demands the exercise of sound administrative discretion requiring the specialized knowledge and expertise of said administrative tribunal. Ancheta. and must refer to the enforcement of the parties' correlative rights and obligations under the Corporation Code. 2012 Under the Relationship Test. Standard Chartered Bank 515 SCRA 170 Under the doctrine of primary jurisdiction. August 15. This is where the Controversy Test becomes material. no doubt exists that the parties were members of the same association. Its enforcement is particularly vested in the SEC. The incidents of that relationship must be considered to ascertain whether the controversy itself is intra-corporate. but this conclusion must still be supplemented by the controversy test before it may be considered as an intra-corporate dispute.Gulfo v. in order to be an intra-corporate dispute. No. the dispute must be rooted in the existence of an intra-corporate relationship. SEC shall indorse the complaint to the DOJ for preliminary investigation and prosecution. Where the complaint is criminal in nature. Relationship alone does not ipso facto make the dispute intra-corporate.